Daily Market Commentary for August 18, 2011

Volatility was at its finest today for momentum traders.
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Jobs data added to the negative market sentiment today. As reported by the Labor Department, the number of people who applied for unemployment benefits last week rose back above the 400,000 level in the latest week, adding to worries about the health of the economy. Unemployment claims rose 9,000 to a seasonally adjusted 408,000 in the week ended August 13. The gain in jobless claims comes just one week after jobless claims slipped below the 400,000 level which was seen as a threshold for improvement in the labor market. Claims in week ended August 6 were revised to 399,000 from the initial estimate of 395,000. Labor Department also reported that the number of people who continued to receive state unemployment checks rose by 7,000 to 3.70 million in the week ended August 6.

Labor Department reported that consumer prices rose a better-than-expected 0.5% in July with the core rate rising a more moderate 0.2%. The cost of living for Americans rebounded during July after a rare decline in June. The consumer price index, tracking the rate of inflation at the retail level, increased 0.5% in July, the biggest gain since March. Core prices, which exclude volatile food and energy cost inputs, increased 0.2% on the month, matching expectations of a slight moderation. Core inflation had risen 0.3% in both May and June, raising eyebrows of investors and economists alike. Core rate for July was boosted by a gain of 0.3% in shelter costs which is its largest increase since June 2008. Energy prices increased 2.8% in July, the first gain seen after monthly declines during both May and June.. Food prices rose 0.4% during the month of July, doubling a 0.2% gain in prior months. Apparel prices rose 1.2% and prices charged for medical care increased 0.3% for the fourth straight month. New car prices were flat in July, while used car prices rose 0.7%.

Per the Federal Reserve Bank of Philadelphia, during the month of August, factory activity in the Philadelphia region weakened sharply to the lowest level seen in over two years, adding to fears that the economy has ground to a halt. Philly Fed’s business outlook survey fell to negative 30.7 in August from 3.2 in July, striking the lowest reading seen, since March 2009 - readings below zero indicate contraction in the region’s factories. The New York Fed’s Empire State manufacturing survey fell to a reading of negative 7.7, the third straight negative monthly reading. New orders index plunged to negative 26.8 from 0.1 and unfilled orders index worsened to negative 20.9 from negative 16.3. Shipments index fell to negative 13.9 from 4.3. Employment index dropped to negative 5.2 from 8.9. Prices paid index dropped to 12.8 from 25.1 and prices received index fell to negative 9.0 from 1.1 in July. Headline consumer-price inflation rose 0.5% in July, with core prices, excluding food and energy prices, rose 0.2%.

It is time for Congressional leaders to take head to comments from billionaire, Warren Buffett. Its time to work harder to save the middle-class, Main Street Americans. He insists higher taxes on millionaires and billionaires will result in helping middle-class, Main Street Americans, who are behind the growth of the country. With the middle-class, Main Street Americans earnings and confidence shrinking - larger companies are feeling the negative impact, at an alarmingly increased rate. Customer base for all businesses, no matter how small or large, will continue to see more adverse affects of a slowing of their business, unless middle-class, Main Street Americans earnings and confidence, begin to improve at a more rapid pace.


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