Trade the News Market Internals Update at 12:00ET

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Dow -85 S&P -9 NASDAQ -19

***Economic Data***

– (BR) Brazil Sept PMI Manufacturing: 45.5 v 46.0 prior
– (CZ) Czech Sept Budget Balance (CZK): -105.1B v -87.3B prior
– (US) Sept ISM Manufacturing: 51.6 v 50.3e; Prices Paid: 56.0 v 54.0e
– (US) Aug Construction Spending M/M: +1.4% v -0.2%e
– (BR) Brazil Sept Trade Balance: $3.1B v $2.5Be
– (MX) Mexico Aug Remittances: $2.1B v $2.0Be
– (EU) ECB completed €3.8B in weekly settlements vs. €4.0B prior in its Gov’t Bond Buying Program; To drain €160.5B in next 7-day Term Deposit Tender vs. €156.5B prior

– Asian traders are off thanks to the Golden Week holidays and European shares sank after leaked Greek budget figures indicated the country may miss 2011 and 2012 targets. US futures were weighed down by the gloom out of Greece, although the September ISM Manufacturing and August Construction Spending data reports helped drag leading US indices back into the black for a little while this morning. The ISM was hardly good news, with the index wavering just a hair above contraction, although it did beat expectations. New orders contracted for a third straight month. The construction index indicated growth, thanks largely to rising outlays on state and local government building projects. European finance ministers are meeting to discuss the Greek situation, including leveraging up the EFSF and possibly greater haircuts for banks on their Greek debt holdings. Flight-to-safety trading is helping the dollar and gold. Spot gold popped higher again, gaining 2% and traded as high as $1,663, for its biggest one-day gain in almost a month. EUR/USD is below 1.3300, its worst level since January. The US 30-year bond is up another 2 points pushing its yield towards 2.8%.

– US casino stocks got hit in the premarket this morning on fears about the Macau gambling market. Jitters about the slowing Chinese economy and the possibility of stricter visa requirements on travel to Macau from the mainland are in play. LVS and WYNN declined 4% or so, while MPEL fell 6%; all three are recouping losses in the early going.

– Data from the International Air Transport Association (IATA) and some Citigroup analyst downgrades are hitting airline stocks. AMR is down 7%, DAL is down 4% and other major airlines are in the red after Citi cut US Airways and United. Meanwhile, the IATA warned that August demand grew more slowly on a y/y basis, while freight traffic contracted at twice the rate seen the year before, indicating an industry slowdown.

– In deal news, shares of Yahoo are up 5% this morning following comments from Alibaba Chairman Jack Ma, who said his company is very interested in acquiring Yahoo. Ma said he has had discussions with Yahoo, as well as other potential bidders. However, keep in mind that Alibaba’s interest in acquiring Yahoo raises sticky privacy questions of a Chinese company controlling information on users all over the world, and especially the US. Yahoo also announced a big content sharing partnership with ABC for news. Pharmaceutical Product Development has agreed to be taken private by The Carlyle Group and Hellman & Friedman for $3.8B in cash.

– The greenback maintained a firm tone ahead of the EU finance ministers’ meeting, although it slid from its best levels after the ISM data beat expectations, repeating a trend seen in similar Asia and European data series. The technical damage on European currencies continued to provide the dollar with momentum. Dealers note that markets continue to be concerned about slowing global growth and are fading reactions to above-consensus data releases. The USD/CAD pair touched fresh one-year highs near 1.0525 before consolidating.

***Looking Ahead***

– 11:00 (EU) Euro Area Finance Ministers meet in Luxembourg
– 11:00 (US) Fed to purchase $2.75-3.50B in Notes/Bonds
– 11:30 (US) Treasury to sell $29B in 3-Month and $27B in 6-Month Bills
– 12:00 (IT) Italy Sept New Car Registrations Y/Y: No est v 1.5% prior
– 13:00 (MX) Mexico Sept IMEF Manufacturing Index: 50.4e v 51.5 prior; Non Manufacturing: 51.0e v 52.0 prior
– 13:00 (IT) Italy Sept Budget Balance: No est v -€6.9B; Budget Balance YTD: No est v -€46.8B prior
– 13:30 (EU) EU President Van Rompuy and Barroso meet Brazil’s President Rousseff
– 17:00 (US) Sept Total Vehicle Sales: 12.30Me v 12.10M prior; Domestic Vehicle Sales: 9.55Me v 9.52M prior

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