Thursday, August 18, 2011

Market comments for Aug. 18th, 2011: We're headed down! (2 UPDATES)

Data released this morning on Initial Jobless Claims shows that we have gone back over 400K again to 408K. Expectations were for 400K. Last week's number of 395K was revised upwards to 399K.

Futures markets are down significantly but the Initial Jobless claims is not the issue causing it to be down over 225 points in the Dow Futures. Also this morning the CPI number for July was released and it is up +0.5%, which was a very inflationary number. Expectations were for only a +0.2%. These numbers when annualized show a very different picture. You see with only a +0.2% CPI, that at an annualized rate would give a2.4% inflation rate, but a +0.5% number, the annualized rate would be 6.0% inflation rate!

The Core CPI rate came in at expectations of +0.2%.

The German's DAX Index is down -227 points right now, or 3.7%, as its markets are open for trading. The UK's FTSE is down -2.5%, France's CAC 40 is down 2.9%. We are going to see a large sell-off in US Markets this morning!

Another factor of why stocks are down significantly worldwide are these comments made yesterday. This from Bloomberg news: "Federal Reserve Chairman Ben S. Bernanke’s pledge last week to keep interest rates near zero until mid-2013 was 'inappropriate policy at an inappropriate time,' Charles Plosser, president of the Fed Bank of Philadelphia, said yesterday in a Bloomberg Radio interview.

The comments from Plosser and Fisher put focus back on how committed the Fed is to the zero-interest rate policy ahead of Bernanke’s comments next week,” said Anders Eklof, a currency strategist at Swedbank in Stockholm. “The Fed has obviously been wrong about the economy, once last summer and then now."

Dallas Fed President Richard Fisher said the central bank shouldn’t enact policy to protect stock investors. Both officials dissented from the Fed’s Aug. 9 statement."

And lastly, here's a question for you: Where would you have made the biggest gains if you invested in Gold or Silver exactly one year ago? It's not what you expect. :) It was Silver! Silver gained over 53.8% while Gold gained 47%. Surprising isn't it!

UPDATE: 7:20am PST

Philadelphia Fed Survey data surprised investors this morning because the news was so terrible. The prior period's data came in at +3.2, while consensus was at +4.0, but the data actually came in at -30, as is shown in the chart below by Haver Analytics.

UPDATE #2: 8:45am PST

Consumer confidence in the U.S. economic outlook slumped in August to the lowest level since the recession, raising the risk that spending will dry up.
The Bloomberg Consumer Comfort Index’s monthly expectations gauge dropped to minus 34, the weakest since March 2009, from minus 22 in July. The weekly measure of current conditions was minus 48.3 for the period ended Aug. 14 compared with minus 49.1, which was the worst reading since mid-May.

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