Stock Market Recap 09-30-10

China Dragon Breaths Fire

Thursday's stock market recap offers several important bits of economic data. The market, represented here by the Dow, swung wildly higher and then lower, but only closed fractionally down on the day. The key data point was relatively positive, as the Chicago Purchasing Managers Index gained ground against expectations for deterioration. Meanwhile, Weekly Jobless Claims edged lower, and toward a point of psychological importance. GDP was revised higher for the second quarter of 2010, to +1.7%. However, the progress of legislation that may threaten trade relations with China frightened investors and weighed on psychology, and will continue to raise counter opinions and theories on impact as the effects of the effort surface. This is your stock market recap for September 30.

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Stock Market Recap

The "Greek Factors" applied to the data points in this stock market recap represent the near-term impact of the data.

Trade Legislation to Restore Fairness
Greek Factor: -1 Near-Term, +2 Long-Term

The US House of Representatives passed legislation that allows American companies to file complaints against US importers who bring in goods that are produced in nations that manipulate their currency, i.e. China. Just hours before the vote, China vowed to increase the flexibility of the Yuan. Too little, too late though, given the Chinese government promised the same thing some months ago. Since that promise, the Chinese Yuan only increased in value by 2% or so.

There is a cost/benefit trade-off that needs to be understood here. This will immediately increase the cost of goods generally in the US, but it will do so while restoring a fair playing field, and giving companies good reason to create jobs in America. Cheers to this jobs creating legislation! However, it will only work if it is effected, not waved as an empty threat to China. Whether that happens or not depends on the will of US government leadership. We expect the US government intends to push China into acting on its own without effecting tariffs. Whether it is a bluff or not will probably not matter, as the government positions itself into a next move that offers little choice but to act.

Jobless Claims
Greek Factor: 0

Weekly Jobless Claims were reported Thursday for the period ended September 25. New benefits filers numbered 453K, down from the prior week's revised 469K. Economists had forecast 459K, but this is given little attention by the market, given the frequency of the data.

The four-week moving average also fell, by 6.250, to 458K. The result should have little market impact, but it does engage investors keying on the 450K to 400K range of filers. As we break lower than 450K, there is a decreasing impact to shares due to the number of data points that have already been reported between 400K to 500K. We have gotten used to it. But, as we approach 400K filers, you can expect to see increasing enthusiasm by the investment community, and a rally becomes possible. That rally, should we break 400K filers, would be a strong one in my opinion.

Chicago PMI
Greek Factor: +1

Good news from the Chicago Purchasing Managers Index Thursday had some impact to early trading. September's Business Barometer Index marked 60.4, above the August mark of 56.7. The data also left economists looking foolish with their forecast for a reading of 56.0, which seemed to make complete sense just a day ago. Production improved, with that index rising to 64.3, from 57.6; and new orders gained to 61.4, from 55.0. Capital equipment investment also gained, to 111.4, from 97.2. But all was not good, with the Employment Index slipping to 53.5, from 58.0, and order backlogs dwindled as well.

GDP Revision
Greek Factor: +1

The final adjustment to second quarter GDP was announced Thursday. Economists expected no change to the data point, with growth expected to remain at 1.6%. When last adjusted, Q2 GDP was revised down from +2.4%. But, surprise, surprise, GDP was hiked up a tenth of a percentage point Thursday, to 1.7%. The GDP Price Index stuck at +1.9%.

DC Doings

Federal Reserve Chairman Ben Bernanke , Deputy Treasury Secretary Neal Wolin, FDIC Chair Sheila Bair, SEC Chair Mary Schapiro and CFTC Chair Gary Gensler testified before the Senate Banking Committee on implementing Dodd-Frank reforms, in Washington. You can find the Chairman's prepared statement here.

Natural Gas Inventory

The EIA reported on Natural Gas Inventory Thursday. In the week ending September 24, natural gas inventory increased by 74 Bcf. Natural gas stocks stood 166 Bcf less than last year at this time and 202 Bcf above the 5-year average. There remains little pressure on pricing from the current supply/demand equation, but that does not speak to expectations and the pricing comparison against oil equivalents.

Corporate Wire

In corporate news, Sanofi-Aventis (NYSE: SNY) held a thematic seminar on diabetes and oncology. Dice Holdings (NYSE: DHX), LeCroy Corp. (Nasdaq: LCRY), The Advisory Board (Nasdaq: ABCO), Valassis Communications (NYSE: VCI), and Marsh & McLennan (NYSE: MMC) held investor days.

The EPS schedule included news from Accenture (NYSE: ACN), Aehr Test Systems (Nasdaq: AEHR), AZZ Inc. (NYSE: AZZ), Charles River Associates (Nasdaq: CRAI), Christopher & Banks (NYSE: CBK), DemandTec (Nasdaq: DMAN), Lawson Software (Nasdaq: LWSN), McCormick & Company (NYSE: MKC), MSCI Inc. (Nasdaq: MSCI), Resources Global Professionals (Nasdaq: RECN) and Smart Modular Technologies (Nasdaq: SMOD).

DuPont (NYSE: DD), Innophos (Nasdaq: IPHS), McGrath Rentcorp (Nasdaq: MGRC), Sensata Tech (Toronto: ST.TO), Ecolab (NYSE: ECL), Roper Industries (NYSE: ROP), Sealed Air (NYSE: SEE), Hubbell (NYSE: HUB.B), Integral Systems (Nasdaq: ISYS), and Praxair (NYSE: PX) presented at the Oppenheimer 5th Annual Industrials Conference. O'Charleys Inc. (Nasdaq: CHUX), Summer Infant (Nasdaq: SUMR), Group 1 Automotive (NYSE: GPI), Warnaco Group (NYSE: WRC.B), and Cracker Barrel Old Country Store (Nasdaq: CBRL) presented at the Wells Fargo Securities Consumer Conference.



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