Intraday Market Update
Global equity markets and commodities are under pressure on the heels of strength in the US Dollar, which is gaining momentum amid uncertainty regarding the size and scope of the second round of quantitative easing that will be delivered by the Federal Reserve at next week's monetary policy meeting. A better than expected headline number in the durable goods report may point to a stronger reading in Friday's GDP report, and that is driving risk aversion and stoking the debate regarding how much the Fed will commit to QE2. All of the major indexes are under pressure with DJIA, S&P 500, and Russell 20000 off by nearly -1.00%. Technology is faring better as the NASDAQ and NASDAQ 100 have lost about -0.25%. Front month crude is down -1.00% after a larger than expected build in inventories. Gold is down -$15.00 to $1,323 per ounce and is approaching two week lows. Silver and copper have lost -1.25% and -2.25% respectively. Global equity markets closed lower highlighted by a -1.46% decline in China, a -1.85% decline in Honk Kong, a -1.07% decline in London, and a -0.69% decline in Germany.

The headline number in the durable goods report, at +3.3%, handily beat estimates of +1.6%. This could point to a stronger GDP reading on Friday and many analysts are questioning whether the more favorable economic data will cause the Fed to scale back the amount of QE2 that is being anticipated by the market. However, a look into the details of the report indicate softer data as aircraft orders lifted the headline number sharply. The ex-transportation components are mixed at best with new orders falling -0.8% m/m, which follows a +1.9% increase in August. On a year over year basis new orders ex-transportation were still up +9.5%, but that compares to a +13.6% y/y reading in August. The bottom line is that growth in manufacturing excluding transportation appears to be slowing and this is causing some uncertainty.

New home sales rose +6.6% m/m in September to an annual rate of 307,000 units, compared to estimates calling for an annual rate of 300,000 units. New home sales have been hitting all-time lows since recordkeeping began in 1963, so while the upside surprise is positive, sales remain depressed. The report's strength is not evenly balanced as the gains are centered in the Midwest with modest gains in the Northeast and South, however, sales contracted noticeably in the West. The median price of new homes rose +1.5% to $223,800 which is an increase of +3.3% y/y. However, the average price fell -1.2% to $257,500 which is a decrease of -11.3% y/y, although the average price is sensitive to price fluctuations in the higher end market. Supply of homes on the market fell to 8.0 months, or 204,000 units, compared to August's reading of 8.6 months. Total supply of 204,000 units is the lowest reading since 1968.

In equities, Dow member Proctor & Gamble (PG) is flat after reporting earnings that were mostly in line with estimates. The company slightly beat estimates on the bottom but slightly missed on the top line. The firm warned that its margins are coming under pressure from higher commodity costs, while sales metrics showed big gains in emerging market product volumes. Energy giant ConocoPhillips (COP) is off more than -1.20%, despite handily beating revenue estimates and earnings were also better than expected. Whirlpool (WHR) is down -4.5% despite crushing earnings estimates and increasing its 2010 outlook. Sprint Nextel (S) is off more than -10% after the firm's quarterly loss widened more than estimates.

In tech land, chip makers Broadcom (BRCM) and STMicro (STM) are up +10% and +4% respectively after positive earnings reports. LCD maker AUOptronics (AUO) is off -2.8% despite reporting a profit against expectations for a loss, probably because the firm said they were cautious on their LCD television business in Q4. Novellus (NVLS) is up +3% after reporting earnings that were well ahead of estimates.

Core Sector List: Overall reading: 5 sectors advancing, 15 sectors declining
Strongest Sectors: Semiconductors, Oil Services, Biotechnology
Weakest Sectors: Gold Miners, Transportation, Telecom


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