Trade the News Market Internals Update at 12:00ET

Dow +144 S&P +18.5 NASDAQ +40

***Economic Data***

– (PD) Poland Central Bank leaves the Base Rate unchanged at 4.50%; as expected
– (US) MBA Mortgage Applications w/e Sept 2nd: -4.9% v -9.6% prior
– (CL) Chile Aug Trade Balance: $491M v $1.1Be
– (CL) Chile Aug Copper Exports: $3.6B v $4.2B prior
– (US) ICSC/GS weekly chain store sales w/e Sep 3rd: -0.7% w/w; +2.7% y/y
– (PD) Poland Aug Total Official Reserves: €107.0B v €106.7B prior
– (US) Redbook Retail Sales w/e Sep 3rd: +4.9% y/y; Sep MTD: +0.4% v Aug
– (BE) Belgium Q2 Final GDP Q/Q: % v 0.7% prelim; Y/Y: % v 2.5% prelim
– (CA) Bank of Canada leaves Interest Rates unchanged at 1.00%; as expected
– (CA) Canada Aug IVEY Purchasing Mangers NSA: 57.6 v 52.2e; PMI Seasonally Adj: 56.4 v 52.3e
– (US) July JOLTs Job Openings: 3.2K v 3.1K prior
– (UK) Aug NIESR GDP Estimate: 0.2% v 0.6% prior
– (HU) Hungary Aug YTD Budget Balance (HUF): -1.545T v -1.494T prior

– US equities are following European markets higher this morning following the German constitutional court ruling authorizing participation in the EFSF. European indices bounced back from approximately two-year lows thanks to the news. In the US, the White House is teasing numbers for President Obama’s big speech on Thursday, with reports indicating he will propose $300B in tax cuts and government spending as part of a job-creating package. Note that spot gold has fallen approximately $65/oz overnight, with spot now trading around one-week lows of $1,800. Treasury markets are seeing some selling with the long bond down nearly 2 points. The 10-year yield has backed up above 2%.

– Major US bank stocks are rapidly taking back yesterday’s losses despite some negative stories this morning. CNBC reported that regulators are asking banks how they would raise capital if market conditions worsen and reviewing results of mandated tests for various banks. Recall that just last week, the Fed requested that Bank of America disclose its contingency plans for dealing with the worsening environment. Over at Goldman Sachs, New York prosecutors have expanded their probe related to firm’s sales of CDOs. Press reports indicate that Morgan Stanley and other investors in certain Goldman transactions received subpoenas in relation to the Goldman probe.

– Now that the summer doldrums are officially over, companies are flooding the market with mid-quarter reviews of their performance. Altera substantially trimmed its Q3 revenue outlook guidance due to weaker demand in several vertical markets including Telecom and Wireless, particularly outside Asia. Note that Altera’s move comes just a week after competitor Novellus cut its Q3 forecast. Nvidia offered relatively robust initial FY13 guidance, saying that the company is projecting growth across its entire GPU and mobile-processor business. ALTR is flat on the day, while NVDA is up 9% but off its best levels. Shares of Yahoo were up 8% just after the open following the ouster of CEO Bartz, although they are rapidly giving up those gains. Outside of tech, Darden Restaurants offered weak guidance for its Q1 and trimmed its outlook for FY12 as well. Both Office Depot and OfficeMax commented on back-to-school sales: ODP said that sales and gross margin are both up over 150 basis points through August compared to the prior year, while OMX warned that it was experiencing a soft Back-to-School season driven by a price conscious consumer and weaker technology sales. In quarterly reports, VeriFone Holdings modestly topped expectations in its Q3 and tweaked its FY11 outlook slightly higher. Pep Boys was more or less in line.

– EUR/USD maintained a foothold above the 1.40 handle during the New York session, despite a raft of cautious economic comments from both sides of the Atlantic. The Bank of Canada left interest rates unchanged, as expected, but it did add a more dovish stance to its rate outlook and stated that the need to withdraw monetary stimulus had diminished as the slower global economy was dampening inflationary pressures. USD/CAD tested above 0.99 on the initial rate announcement but came off its best levels as the BoC expressed optimism on H2 growth forecasts. The IMF further reduced its global 2011 GDP growth outlook to +4.0% from the +4.2% estimate offered just over a week ago.

***Looking Ahead***

– 11:15 (US) Fed’s Evans speaks in London
– 11:30 (US) Treasury to sell 4-Week Bills
– 11:30 (EU) EU President Van Rompuy speaks at London School of Economics
– 14:00 (US) Fed releases Beige Book Economic Survey
– 14:00 (US) Fed Beige Book
– 14:00 (IT) Italy Senate expected vote on austerity measures
– 16:00 (US) Fed’s Williams speaks to Seattle Rotary Club
– 19:50 (JP) Japan July Trade Balance – BOP Basis: ¥162.6Be v ¥131.5B prior

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