Wall Street Greek: TUESDAY’S MARKET: Approach with Trepidation

Approach Fed day with trepidation or bear the con- sequences of Fed foolishness. While it seems clear the Federal Reserve will initiate its tapering of asset purchases with a declaration tomorrow, you never can be quite sure what the Fed may do or say. Given that stocks have already regained their high ground, now is probably not the time to make a bet on the Fed or on a non-event.

Tuesday’s Market

Market ETF	September 17	Year-to-Date
SPDR S&P 500 (NYSE: SPY)	+0.3%	+20%
SPDR Dow Jones (NYSE: DIA)	+0.2%	+18.9%
PowerShares (Nasdaq: QQQ)	+0.6%	+20.2%

Stocks are continuing higher as the news of Fed tapering looks to be far less traumatic than initially expected by trigger happy traders and the maniacal media. We are now at about the highs on the year, and I see little near-term risk of retracing until October on a fundamental basis – technically speaking, there’s reason for concern as stocks appear extended. Still, the Fed is always capable of a shocker, so now is not the time to be betting on anything.

Economic Events

ECONOMIC REPORT SCHEDULE
Economic Data Point	Prior Period	Expected	Actual
MONDAY
Empire State Manufacturing Index	8.24	9.0	6.29
Industrial Production	0.0%	+0.5%	+0.4%
-Capacity Utilization	77.6%	77.9%	77.8%
-Manufacturing Production	-0.4% (R)	+0.5%	+0.7%
TUESDAY
Consumer Price Index	+0.2%	+0.1%	+0.1%
-Core CPI	+0.2%	+0.2%	+0.1%
ICSC Weekly Store Sales	+1.5%		-1.6%
-Year-to-Year Pace	+2.3%		+3.2%
Redbook Store Sales	+4.6%		+3.4%
Housing Market Index	58 (R)	59	58
Treasury Int’l Capital	-$67.0 B		+$31.1 B

-R symbolizes “revised”

The economic data on the day was mediocre, and Monday’s reports were mixed, though positive. On Monday, while industrial production improved, it fell short of expectations. Still, the manufacturing sector improved ahead of expectations. The NY Fed’s measure of regional manufacturing continued to show economic expansion, but at a lesser pace than the prior month and less than economists expected. On net, I would call that a positive economic data flow.

Tuesday’s data showed a disappointing pace of same-store sales as reported by the ICSC and Redbook. On a year-to-year basis, the ICSC showed an improved rate of growth while Redbook showed a slower pace. On a weekly basis, the ICSC showed a 1.6% decrease in sales. The calendar very probably played a role in the latest period due to the Jewish holidays.

The Consumer Price Index (CPI) offered no pressure to the Federal Reserve, giving it the leeway to hold back from immediate tapering if it so decides. The headline CPI only increased by 0.1%, and excluding food and energy, prices also only edged up by a modest 0.1%.

The Housing Market Index, which reports on the sentiment of homebuilders, held steady at 58, though the prior month figure was revised down to that level. With mortgage rates higher and housing activity clearly staggered, some thought there might be some change in the builder mood. Though, economists, on average, saw the index holding steady at the level before revision. The SPDR S&P Homebuilders (NYSE: XHB) is up 1.0% on the news.

The Treasury International Capital (TIC) Report showed that foreign demand for long-term US securities grew in July. If you read my report on how war could benefit the real estate market, you understand why I think that trend could continue in the months ahead.

Overseas Markets

EUROPE	10:42 AM	ASIA/PACIFIC	CLOSE
EURO STOXX 50	-0.02%	NIKKEI 225	-0.7%
German DAX	-0.1%	Hang Seng	-0.3%
CAC 40	-0.0%	S&P/ASX 200	+0.1%
FTSE 100	-0.3%	Korean KOSPI	-0.4%
Bloomberg GCC 200 Mideast	-0.3%	BSE India SENSEX	+0.3%

International markets moved lower Tuesday as global investors cautiously anticipate the Wednesday Fed decision in the U.S. The threatened beginning of tapering has global traders back on their heels.

Commodity Markets (11:24 AM)

WTI Crude	-0.9%
Brent Crude	-1.7%
NYMEX Natural Gas	+0.0%
RBOB Gasoline	-1.6%
Gold Spot	-0.2%
Silver Spot	-0.2%
COMEX Copper	-0.0%
CBOT Corn	-0.3%
CBOT Wheat	+0.1%
CBOT Soybeans	-0.9%
ICE Cocoa	-1.2%
ICE Sugar	-0.6%
ICE Orange Juice Conc.	-2.9%
CME Lumber	+1.1%
CME Live Cattle	-0.5%

Energy continues to unravel post the solution for Syria. Tapering will now work to slow economically sensitive petroleum, but for only as long as data does not reinforce economic confidence.

Corporate Events

Microsoft (Nasdaq: MSFT) announced a new share buyback and dividend, lifting the shares 0.7% today. Apple (Nasdaq: AAPL) is holding ground at $450 and looks solid here to me. Safeway (NYSE: SWY) is up 9% today on implementation of a poison pill after noting a shareholder taking a significant interest.

REPORTING EARNINGS
Company	Ticker
MONDAY
NAPCO Security Technologies	Nasdaq: NSSC
Oclaro	Nasdaq: OCLR
WPCS International	Nasdaq: WPCS
Cvent Inc.	NYSE: CVT
TUESDAY
Coty	Nasdaq: COTY
FactSet Research Systems	NYSE: FDS
ALCO Stores	Nasdaq: ALCS
Adobe Systems	Nasdaq: ADBE
Digital Cinema Destinations	Nasdaq: DCIN

MOST ACTIVE STOCKS
BIGGEST GAINERS	% Gain
Kythera Biopharmaceuticals (Nasdaq: KYTH)	+27%
Repros Therapeutics (Nasdaq: RPRX)	+22%
Medgenics (Nasdaq: MDGN.WT)	+21%
Internet Gold Golden Lines (Nasdaq: IGLD)	+18%
Agenus (Nasdaq: AGEN)	+23%
Aeropostale (NYSE: ARO)	+17%
Air Industries (Nasdaq: AIRI)	+15%
VelocityShares 3X Inverse Brent (Nasdaq: DOIL)	+13%
Regado BioSciences (Nasdaq: RGDO)	+12%
B Communications (Nasdaq: BCOM)	+14%
BIGGEST LOSERS	% Drop
Cognex (Nasdaq: CGNX)	-50%
Alliance Fiber Optic Products (Nasdaq: AFOP)	-49%
Gold Resource (Nasdaq: GORO)	-18%
CVENT (NYSE: CVT)	-15%
Outerwall (Nasdaq: OUTR)	-12%
Crossroads Systems (Nasdaq: CRDS)	-12%
Fuwei Films (Nasdaq: FFHL)	-10%
Tiger Media (NYSE: IDI)	-11%
Omeros (Nasdaq: OMER)	-10%
China Xiniya Fashion (NYSE: XNY)	-6%

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