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Strong Foundation

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According to the Commerce department, housing starts jumped 3% to 1.67 million in July, well above economists' expectations of a drop to 1.62 million. This is the highest level since February 2000, and the heaviest month since the 1970s. Year to date housing starts are up 2 percent over the 2000 pace. New building permits did fall 2% in July.

The Consumer Price Index, a measure of retail inflation, fell 0.3% in July, more than the expected 0.1% drop. The gives the Fed room to keep cutting interest rates if necessary. Longer- term treasuries are up slightly on the news.

Lastly, weekly jobless claims fell more than expected to 380,000. The four-week moving average, which smoothes out weekly fluctuations, also fell 9,250 to 370,750. The total number of people receiving benefits fell 36,000 to 3.04 million.

Stock futures trading lower

Stock futures are trading lower this morning with S&P futures down 3.3 points, NASDAQ futures are off 10 and Dow futures are down 22 points. Fair value for the S&P 500 today is $3.06. HL Camp & Company has their computers set for program buying at $4.22 and set for selling at $1.68. Fair value for the NASDAQ- 100 today is $6.58.

Traders will want to be keeping an eye on foreign currencies today and in the coming sessions. One place we could see a shift of capital is into the Euro$ (eu01u). Money managers and institutions don't necessarily care where they can make money, as long as they like the risk reward and the trend. We could very well see some selling in bonds in coming sessions, but instead of that money rotating into stocks, the money could flow into foreign currency. There are still some companies that could benefit from a weakening dollar, but those names exist in the deeper cyclicals and multinationals. I still think that "technology names" will be suspect (even though they may derive a large amount of revenue from abroad) as we would still be in a very early stage of recovery and IT budgets just aren't increasing at this time. Many of the deeper cyclicals like Caterpillar (CAT), International Paper (IP), Du Pont (DD) and Deere (DE) are names I've talked about in great detail since last October.

Jeff Canavan
Assistant Analyst

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