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Market Updates

Producer prices edge higher

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Prices paid at the production level rose a modest 0.1% in June, which was slightly higher than the unchanged level that economists had expected. Excluding the more volatile food and energy components, core prices rose 0.2%. Energy prices were unchanged while food prices rose 0.1%.

Finished goods prices are down 2.1% in the past 12 months, while core prices are up 0.3% during the same period. Intermediate goods prices of crude goods fell 3.6%, helped by a 19.5% drop in cure petroleum prices.

Intermediate core prices, excluding food and energy, gained 0.2% in June and have fallen 1% in the past year.

This morning's PPI numbers show little inflationary pressures at the producer level and has December Gold futures (gc02z) 316.10 -0.37% edging lower.

Jobless claims rise by 16,000

The Labor Department said that first-time claims for state unemployment benefits rose by 16,000 to 403,000 in the latest week. This was higher than the 384,000 forecasted by economists.

The Labor Department said the rise in the latest week's claims number was boosted by the annual furloughs in the auto and textile industries, which are only partially accounted for by seasonal adjustments. Both sectors will temporarily shut down plants for retooling, as they get ready for fall production.

The closely watched four-week average of initial claims rose by 2,000 to 395,000, the highest level in three weeks, but still below the 400,000 mark.

Continuing claims for state benefits fell by 33,000 in the week ended June 29 to 3.64 million, pushing the four-week average to a three-month low of 3.69 million. The continuing claims numbers do not include some 1.2 million workers receiving extended federal unemployment benefits. A year ago, continuing claims totaled 2.98 million.

Yahoo! Update

After reporting earnings that beat expectation, shares of Yahoo! Inc. (NASDAQ:YHOO) $12.19 have given back all of their late session gains and are actively traded at $10.92 (-10% from close), as Merrill Lynch downgraded the stock this morning to near-term "reduce/sell." Merrill believes shares of YHOO are priced to perfection, and that the fundamentals do not support the company's valuation. In the current market environment, Merrill believes a more reasonable valuation is $9-$10 a share.

As such, my target of $11.50 for those playing the July $12.50 puts at OptionInvestor.com may want to lock in a nice gain this morning, or simply lower stops to the $11.55 level for this play.

Wal-Mart raises guidance

Discount retailing giant Wal-Mart (NYSE:WMT) $54.90 is increasing its July quarter earnings estimates to $0.44-$0.45 a share from previous guidance of $0.43-$0.44 (analysts' estimates are $0.44) and raised its full year view to $1.76-$1.78 from a previous range of $1.74-$1.76 (analysts' estimates are $1.78), citing stronger than expected sales for its stores.

Stock futures lower

Stock futures had been hovering above and below fair value this morning, but have started to trade near their worst levels of the morning. S&P futures (sp02u) are down 6 points at 913, NASDAQ futures (nd02u) are down 3 at 960 and Dow futures (dj02u) are lower by 50 points at 8,745.

Fair value for the S&P 500 today is $1.08. That price will not change during the session. HL Camp & Company has their computers set for program buying at $2.04 and set for program selling at $-1.48. Fair value for the NASDAQ-100 today is $3.75.

Treasuries are once again seeing a strong round of buying this morning and the YIELD on the benchmark 10-year ($TNX.X) is dropping sharply to 4.564% and hints of a very defensive posture from the MARKET, as cash rotates to the perceived safety of Treasuries.

Jeff Bailey
Senior Market Technician
Option Investor

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