Intraday Market Update
US equities are in positive territory after erasing a -1% loss in early trading on the back of a mixed report on home prices, a larger than expected drop in consumer confidence, and a contraction in the Richmond Fed manufacturing activity for the first time since January. The major US indexes plunged lower at the open but have since bounced into the green. Gold sold off in overnight trading but has since bounced nearly +$30 from its lows as it continues motoring to new all-time highs. Front month crude (-.10%) has made an intraday reversal after touching fresh two week highs. Overseas, the Asia-Pacific region posted solid declines led by the Japan and Honk Kong exchanges falling more than -1%. European markets were mixed, but most posted modest losses.

Europe's markets have held up relatively well considering a possible string of sovereign debt downgrades on the horizon. Moody's is nearing the completion of a three month review of Spain's Aaa sovereign rating his week and many analyst are expecting at least a one notch cut. Elsewhere, Standard & Poor's and Fitch warned they may cut Ireland's credit rating again, which comes a day after Moody's cut their ratings on Anglo Irish bank's lower grade debt. The news sent Irish credit spreads to new highs which also drove other Euro zone spreads higher. Meanwhile, there are fresh comments out of the UK for another round of stimulus. Bank of England Governor Posen warned that UK inflation may fall well short of the bank's target level without more quantitative easing. Posen also said that additional monetary stimulus should begin in the form of additional QE gilt purchases.

Here in the US, S&P Case Shiller's Home Price Index points to weakness again, at least on a seasonally adjusted basis. Adjusted data for the composite 10 index of major cities was unchanged in July and is down -0.10% for the broader composite 20 index. The details indicate two months of price moderation following the post-stimulus surge. On a y/y comparison prices are down from +5.5% in May to +4.0% in July for the composite 10 index. This is a tough report to dissect but it appears the market believes home prices are basing and may be near a bottom.

The Consumer Confidence index released in the pre-market fell nearly -5 points in September to 48.5 which is the lowest reading since February. More importantly, the direction of consumer confidence has been falling after reaching a swing high in May of 62.7. Those saying jobs are currently hard to get rose +0.40% to 46.1% which is the highest reading since March, while expectations for employment six months from now also show deterioration. Those seeing an increase in their income six months out are also down -0.40% to 10.2%, also the lowest reading since February. Respondents planning to buy a home are also down -0.20% to 1.9% which is near July's depressed post-stimulus low. The main takeaway from today's report may point to impending trouble in the labor market.

In earnings, Walgreens (WAG) has gained +12% after reporting earnings that beat estimates. On the conference call, WAG's CEO said he expects the 2010 flu season to be better than last year, and said the company has acquired 15 million flu shots now versus 5 million at the same time last year. Paychex (PAYX) is relatively flat despite beating earnings estimates on the top and bottom line. The firm said its client retention improved but sales of new units continue to be difficult, and also remains cautious for its FY2011.

Research in Motion (RIMM) is off nearly -3% after unveiling their new Playbook tablet computer yesterday. RIMM's device offers a 7-inch screen and strong specs, but analysts are skeptical of the firm's decision to launch the device in 2011, which should be just in time to compete with Apple's second release of the iPad. Speaking of Apple, shares of AAPL plunged about -$15 just after the open on no news of significance. There was a rumor circulating Apple's COO being appointed CEO of Hewlett-Packard, but that turned out to be false.

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


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