Intraday Market Update
US equities gapped nearly -1% lower this morning after weak PMI data out of Europe and a surprise increase in US weekly jobless claims. However, an upbeat housing report and a surprise up tick in the Index of Leading Economic Indicators caused shorts to cover which filled all of the gaps in the major indexes. The S&P 500, DJIA, and small caps are now hugging the flat line while the tech heavy NASDAQ is posting modest gains, led by the semiconductors. Weak European data and comments by Ireland's Finance Minister indicated that Anglo Irish Bank bondholders may not be able to get full value for their bond holdings sparked additional sovereign debt worries. Spreads between Irish and German 10-year bonds widened further and the US Dollar strengthened on the news. US Treasuries are higher and gold remains near all-time highs at $1,295 an ounce. Other commodities are posting modest gains across the board with natural gas gaining +1.70% and trading near one month highs. Overseas, European markets were lower across the region with most posting losses in -0.50% range. The Asia-Pacific markets were mixed but most posted slight gains.

US equities sold off after the initial jobless claims report showed that workers filing for unemployment unexpectedly rose by +12,000 to 465,000, compared to last week's figure which was upwardly revised by +3,000 to 453,000. Estimates called for claims to come in at 450,000. Continuing claims declined as did the four week moving average of 463,250 which is down more than -10,000 m/m and could to point to strength for the September employment report.

The National Association of Realtors says "the healing process has begun" in the post stimulus housing market after existing home sales rose +7.6% in August to an annual rate of 4.13 million units. This is noticeably higher than July's annual rate of 3.84 million units. Gains were seen in all regions and supply, as measured by the average time it takes for a home to sell, fell from 12.5 months to 11.6 months, but still remains at bloated levels. Prices are not improving though as they fell -1.9% to a median price of $178,600. Traders will be looking for a similar gain in Tomorrow's new home sales report. Could the recent string of favorable housing reports signal the bottom of the housing market? I'm not so sure as these figures represent the summer buying season which is the busiest time of the year. Nonetheless, equities recovered from their lows as traders cheered the news.

The Index of Leading Economic indicators jumped +0.3% in August but the strength was attributed to a swing higher in consumer expectations. What's troubling is that August's consumer expectations component reversed a plunge in July and we all know what happened with September's mid-month consumer sentiment reading. It reversed back to July's levels. The next biggest factor boosting August's LEI was a swing higher in money supply which is surely going to continue given the Fed's promise for another round of quantitative easing. Overall, today's LEI report is mixed and says that little economic change is expected through Q1 2011.

In equities, after selling off -4.3% yesterday, Red Hat (RHT) is up +12.50% after an upbeat earnings report that saw y/y revenue growth of +20%. The producer of Linux open source operating systems said they continued to benefit from new project spending, expansion and cross selling of its product solutions, and strong renewals in their top accounts. Bed, Bath and Beyond (BBBY) is up +4.5% after the firm beat Q2 earnings estimates and raised their outlook. Rite Aid (RAD) is down -14% after their Q2 losses were more than estimates and revenue was soft. The firm's guidance for FY11 was also a bit lower than the firm's prior range. Finally, Avis (CAR) raised their bid for Dollar Thrifty (DTG) by about $5 to $45.79. This comes after most analysts said Avis would not raise their bid for DTG after Hertz (HTZ) raised their cash offer for the company a few weeks ago. DTG is trading above $52.00 which well above the latest offer price, signaling traders think higher bids are coming. CAR and HTZ are down on the news.

Core Sector List: Overall reading: 9 sectors advancing, 11 sectors declining
Strongest Sectors: Semiconductors, Retail, Internet
Weakest Sectors: Real Estate, Insurance, Home Construction


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