The day started out well enough, even despite Treasury Secretary Geithner's tough talk yesterday. Asia was up in fact, benefiting perhaps from a Morgan Stanley call on the Japanese Yen. The game changer this morning though, turning stocks sour after a week lifted by Tea Party victories, was the Consumer Sentiment reading and a scare in Ireland. The consumer mood soured to its lowest mark since August 2009. That rendered an uplifting CPI report mute this morning, and threatens negative territory for stocks today. The "Greek Factor" ranges from +3 to -3, and is a subjective measure of The Greek's view of the market impact of individual and aggregate news and the day's scheduled events.
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.
Consumer Sentiment Marks Apocalyptic 66.6
We suspect the market is liking the wins of Tea Party Republicans (this is what they should be called, since it is not a new party), and has moved on recent election results this week more than anything else. The Dow jumped Tuesday and has displayed a clear upward bias ever since. However, all that changed this morning with a scare about the sovereign debt of Ireland and a dire consumer sentiment reading.
Consumer Price Index (CPI)
Greek Factor: +1
Following yesterday's favorable PPI report, the Bureau of Labor Statistics reported on the Consumer Price Index for August today. While yesterday's data covered producers, this measure is closer to the hearts of economists and policy makers with their ear attuned to the rail of deflation and inflation.
The Consumer Price Index (CPI), like its PPI peer, keys on two bottom line data points. The Headline CPI metric aggregates consumer prices with disregard for the significant swings in prices for food and energy, whereas the Core CPI weeds out those two factors, to provide the public with a more applicable inflation gauge.
The Headline Consumer Price Index increased 0.3% in August, which was in line with economists' forecasts. This latest result compares against a seasonally adjusted increase of 0.3% in July as well. Removing seasonal adjustments shows a 0.1% increase in the CPI last month.
Like in July, the energy component of the index played a key role in driving the substantial price rise. The overall energy component rose 2.3%, so that the removal of energy and food prices led to an unchanged Core Consumer Price Index in August. This matched against a 0.1% increase in July and also against economists' forecasts for the same gain this latest month. Generally, we would view this as clearly good news, but with fears now centered on deflation, that's not so definite. That said, we think the market is far from buying into a deflation scenario, and view the CPI data as a positive driver this morning.
Greek Factor: -2
The University of Michigan produced its Consumer Sentiment Index in conjunction with Reuters this morning. Consumer Sentiment weakened unexpectedly in this early September reading, with the Index falling to an ominous mark of 66.6, down from 68.9 in August. Economists were looking for a reading of 70.0. The current reading is the lowest since August of 2009, and perhaps reflects consumers' frustration with their financial situation and the economy while purchasing back-to-school goods, in this analysts' view. It's also likely that the upcoming elections and this month's primaries intensified consumer emotions and drove exaggerated responses by consumers.
Greek Factor: -1
Germany reported its Producer Price Index this morning. The measure showed a 3.18% increase for August, versus the 3.66% gain seen in July. The DAX is down fractionally this morning, and so the data was digestible, especially considering renewed worries around Ireland today. Europe was mostly mixed today and relatively unchanged. Asia reacted to the US Treasury Secretary's report to Congress (re China trade) without even a whimper. The NIKKEI 225 jumped 1.2% and the Hang Seng 1.3%. We suspect this will all change once the Chinese government has issued its likely harsh response. Thus, beware the potential Chinese catalyst in coming days. Asia may also be moving on a Morgan Stanley (NYSE: MS) analysts' call for the Japanese Yen to weaken by year's end, thanks to Japanese government intervention. However, the most important impact to US trade this morning is rising concern about a sovereign debt crisis brewing in Ireland.
Consumer Advocate Appointment
Greek Factor: -1
President Obama appointed Elizabeth Warren to the position of special advisor and overseer of a new consumer protection bureau. This should be seen as a positive by Wall Street, but considering the aversion to regulation amid the money-movers, that's not the case. Warren has been painted as anti-Wall Street, which makes her a popular pick just about everywhere else.
Gee, do you think I should have named my blog Main Street Turk, considering what's happened to Wall Street and Greece since. Our moniker is tied to two of the most detested topics in our contemporary society today (stretching globally mind you), Wall Street crooks and irresponsible financial management in Greece. Nice branding job Markos! Why thank you Markos.
The SEC considers disclosure rules today for public companies' short-term borrowings.
Corporate News Drivers
Greek Factor: +1
Oracle (Nasdaq: ORCL) reported earnings that beat Street views last night and the shares are up plus 6% in the early going this morning. Research in Motion (Nasdaq: RIMM) is also benefiting from its report, up plus 2% this day. Cerner (Nasdaq: CERN) is presenting at the Stifel Nicolaus Health Care Conference. The Ardour Capital Investments, LLC Energy Technology Conference highlights presentations by Satcon Technology (Nasdaq: SATC) and Ultralife (Nasdaq: ULBI). Amerigroup (NYSE: AGP) has its analysts meeting scheduled for today, and Dynamex (Nasdaq: DDMX) has its earnings conference call.
The day's early winners (prices may have changed since) include Primoris Services (Nasdaq: PRIMU) +76%, Crucell (Nasdaq: CRXL) +55%, Student Loan Corp. (NYSE: STU) +41%, LiveDeal (Nasdaq: LIVED) +26%, Cleveland Biolabs (Nasdaq: CBLI) +15%, Magyar Bancorp (Nasdaq: MGYR), Sapiens International (Nasdaq: SPNS) +18%, DayStar Tech (Nasdaq: DSTI) +11%, Brooklyn Federal Bancorp (Nasdaq: BFSB), Research Frontiers (Nasdaq: REFR) +9%, Orthovita (Nasdaq: VITA) +5%, China Cord Blood (NYSE: CO) +7%, Patrick Industries (Nasdaq: PATK) +8%, First Marblehead (NYSE: FMD) +10%, First Business Financial (Nasdaq: FBIZ) +14%, TPC Group (Nasdaq: TPCG) +8%, Hudson Highland Group (Nasdaq: HHGP) +5%, Ultralife (Nasdaq: ULBI) +5%, Ruth’s Hospitality Group (Nasdaq: RUTH), Xfone (AMEX: XFN) +6%, Tianli Agritech (Nasdaq: OINK) +7%, Travelzoo (Nasdaq: TZOO) +6%.
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