Need To Know News

Equities finished lower with Dow futures down 1.3% to 11545, S&P futures fell 1.1% to 1283 and Nasdaq futures tumbled 1.6% to 1876.

In the morning, S&P futures repeatedly bounced off resistance at yesterday’s close of 1298. S&P’s made lower highs and lower lows throughout the session and closed just above the 21-day moving average of 1281.25.

All 10 sectors in the S&P500 finished lower with Information Technology stocks and Utilities down over 1.5%. The GSE’s had a bad end to the week with both Freddie and Fannie plunging 14%.

At 10am on Tuesday, July Construction Spending Is expected to fall 0.4%. Also at 10am, the August ISM Manufacturing Index is expected to be unchanged at 50.

The August ISM Manufacturing Index is expected to be unchanged at 50. The July New Orders Index dropped to 45.0 from 49.6, the Shipments Index grew to 52.9 from 51.5 and the Employees Index jumped to 51.9 from 43.7 in June.

The Prices Paid Index fell to 88.5 in July from 91.5 in June, the Inventories Index dropped to 45.0 from 51.2, and the Backlogs Index declined to 43.0 from 47.5.

After posting a reading over 50 in May, the index is set to come in right on 50 for the second straight month. While not showing economic growth, the index still is above normal recessionary levels.

In Regional FED data, New York and Chicago indices beat expectations, but the Philadelphia index was lower than consensus.

August Empire State FED Index: 2.8 vs. -4.9 prior
New Orders: -2.2 vs. 8.3 prior
Prices Paid: 65.2 vs. 77.9 prior
Employment: -4.5 vs. -6.3 prior

August Philly FED Index: -12.7 vs. -16.3 prior
New Orders: -11.9 vs. -12.1 prior
Prices Paid: 57.5 vs. 75.6 prior
Employment: -1.1 vs. -7.3 prior

August Chicago PMI: 57.9 vs. 50.8 prior
New Orders: 60.2 vs. 53.5 prior
Prices Paid: 80.6 vs. 90.7 prior
Employment: 39.2 vs. 45.9 prior

• July Construction Spending is expected to fall 0.4% following a 0.4% decrease in June.

• Once again, weakness in Residential Construction is expected to be a major drag on total construction over the period, as poor access to credit has kept potential buyers on the fence and inventories of unsold homes high. Residential Construction fell 1.8% in June following a 1.1% decline in May. Single-Family Home Construction fell 3.7% in June after falling 3% in May.

• The July Employment report revealed a 0.6% drop in aggregate construction hours worked

• July Housing Starts Fell 1.1% to a multi-year low of 965k units annualized

Canadian markets will be closed for Labor Day on Monday. The first economic release next week is on Wednesday at 9:00 am EDT - the BOC rate announcement. Most analysts are expecting the bank to keep the rate unchanged at 3% in spite of today less than expected Q2 GDP reading (0.3%).
“Today’s report argues for maintaining the fairly accommodative 3% rate which still reflects some stimulus in the system,” Paul Ferley assistant chief economist with RBC told NTKN.

On Friday Statistics Canada will release Employment and Unemployment numbers for August at 7am EDT. Canadian Employment is expected to gain 10K jobs after it shed 55.2K in July, while Unemployment is expected to edge up to 6.2% from 6.1% prior.
At 10 am EDT the Ivey School of Business will release the IVEY PMI for August with the index expected to moderate to 61.5 from 65.5 prior.

Hurricanes have an eye-wall in which the wind and rain move at the fastest counter-clockwise speed in a hurricane.

Category 1 — Winds 74-95mph
Category 2 — Winds 96-110mph
Category 3 — Winds 111-130mph
Category 4 — Winds 131-155mph
Category 5 — Winds greater than 155mph

Most people can remain standing, even walking in 75mph winds; falling down and being swept along happens in 80 to 95mph winds.

10 minutes of hurricane energy is equal to the energy of the world’s entire nuclear stockpile.

The UK August Citi/YouGov poll revealed a 0.2% in 12 month inflation expectations to 4.4%. Long-term inflation expectations (5-10yrs) fell 0.2% to 3.4% in August. Despite the rise in short-term expectations, the drop in long-term expectations is good news for the BOE which frequently stresses the importance of well anchored medium to long-term inflation expectations over

When the FED wants to send a message, they schedule speakers nearly on top of one another and while the topics among speakers may differ, the message always gets out.

So far we have 5 scheduled speakers, not including the perpetual “financial education” crew.
Kroszner kicks off the week with talking about the International Financial System in Buenos Aires - On
MONDAY - Ok, so maybe he’s not part of this week’s message.

Kansas City’s Hoenig is also in Buenos Aires but will speak after Kroszner - On MONDAY so not likely to be a domestic message in that one either.

On Wednesday Rosengren will speak on the state of the economy and the mortgage crisis - the subject of most FED speeches lately. The Dallas FED’s Fisher is also slated for Wednesday to discuss “economic challenges” and San Fran’s Yellen is on Thursday and Friday discussing her favorite topic lately, the economic outlook (speeches are likely to be identical).

The best guess for these speeches is that they will lower expectations for economic growth in Q4 and perhaps H1 2009 - but counterbalance a not-great forecast with some upbeat news about inflation being somewhat contained. None of the speeches are likely to be market - moving.

Energy markets finished mixed with Crude flat at 115.59, Unleaded up 1.1% to 305.50, Heating Oil adding 0.5% to 319.75 and Natural Gas falling 1.3% to 7.949.

In the afternoon, Crude moved into negative territory and made a double bottom at 115.30. It reversed back into positive territory but shot to a low of 115 going into the close before buyers came back in to send it back towards yesterday’s close.

Natural Gas also made a sharp move downwards right before the close. It plunged through resistance at the key $level and fell to 7.926 before paring its losses in the last few minutes.

Tropical Storm Gustav is 125 miles ESE of Grand Cayman and 425 miles ESE of the western tip of Cuba. It is moving WNW at 11mph with winds blowing at 70mph. Gustav is expected to pass over Grand Cayman today, hit western Cuba on Saturday, and move in the Southern Gulf of Mexico Sunday. Gustav is expected to strengthen to a hurricane later today and could become a major hurricane before making landfall over western Cuba.