Intraday Market Update
In a relatively quiet session so far US Equities are under pressure, but are still trading within this week's sideways range. Lackluster earnings from FedEx, a second consecutive monthly reading of contraction from the Philadelphia manufacturing sector, and weakness in global equities has been enough to offset another decline in weekly jobless claims. All of the major US indexes are in the red being led by the Russell 2000 shedding -1.25%, while the DJIA is only slightly negative and the best performing index. The S&P 500 and NASDAQ are both off by approximately -0.40% as trading remains choppy ahead of OPEX tomorrow. Gold (+$6) traded to fresh all-time highs on the heels of comments from China's Sovereign Wealth Fund when they warned that if US policy remains loose China should divert purchases of US debt to non-dollar assets. Meanwhile, in his testimony before Congress, US Treasury Secretary Tim Geithner said that China may meet the criteria for being an FX manipulator at some point. Crude oil is down -2% and has lost more than -5% since its highs on Tuesday afternoon. Equity markets around the world were lower on Thursday led by a -1.89% slide in the Shanghai Index.

This week's initial jobless claims report registered 450K which is the lowest total since July. Last week's claims were revised higher again, but only slightly this time from 451K to 453K. The 4 week moving average registered the largest decline of 2010, down -13.5K to 464.75K which is 20K lower than mid-August. Today's report continues a string of positive reports that may point to strength in the monthly employment report, although speculation surrounding delays in filing claims related to the Labor Day weekend still remain. Reports over the next couple of weeks will need to confirm the recent down tick in initial claims.

In a bit of not so good economic news, the Philly Fed Manufacturing Survey showed the region is contracting for the second straight month. August's reading of -0.7 missed estimates of 3.8. A reading of zero marks the point between expansion and contraction. August's reading is better than July which came in at -7.7, but the individual sub-indices tell a more negative story. The headline number is not a composite reading, rather it is reading on a single subjective question which asks: What is your evaluation of the level of general business activity? The answer choices are whether general business activity increased, no change, or decreased from the prior month.

In the sub-indices, the negative side of the ledger shows that new orders (-8.1 vs. -7.1 prior) contracted for the third consecutive month, unfilled orders extended their run of contraction, and shipments contracted for a second month. Delivery times and the work week continued to shorten, while inventories (-16.7 vs. -11.6 prior) suggest business may be getting more defensive by letting their inventories fall. On the positive side of the ledger employment (+1.8 vs. -2.7 prior) expanded and the longer term outlook for business conditions still remains positive.

In earnings news, FedEx (FDX), trading near $82.00, is off -4% after the firm missed earnings estimates by a penny and offered weak Q2 guidance, although the firm slightly raised their FY11 outlook . The firm said strong demand for its services, due to "improved global economic conditions," resulted in higher volumes and better revenue per shipment at its express and ground units. However, on the conference call with analysts, the company's CEO said, "We are expecting a phase of somewhat slower growth going forward." The company announced plans to merge two of its freight handling units with the goal of restoring profit margins. As a result the company expects its workforce to be reduced by 1,700 full-time employees. Piper Jaffray reiterated their overweight rating with a price target of $110, saying they are buyers on weakness following the Q1 report.

Core Sector List: Overall reading: 2 sectors advancing, 18 sectors declining
Strongest Sectors: Coal Miners, Gold Miners
Weakest Sectors: Home Construction, Banks, Broker Dealers, Oil Services


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