Trade the News Market Internals Update at 12:00ET

Dow +173 S&P +23 NASDAQ +65

***Economic Data***

– (PO) Portugal Jun Trade Balance: -€1.0B v -€1.7B prior
– (US) July NFIB Small Business Optimism: 89.9 v 89.9e
– (US) ICSC/GS weekly chain store sales w/e Aug 6th: -0.5% w/w; +3.6% y/y – (CA) Canada July Housing Starts: 205.1KK v 194.5Ke v 200.8K prior (revised from 197.4K)
– (US) Q2 Preliminary Nonfarm Productivity: -0.3% v -0.9%e; Unit Labor Costs: 2.2% v 2.4%e
– (US) Redbook Retail Sales w/e Aug 6th: +4.8% y/y; Aug MTD: +0.7% v Jul
– (MX) Mexico Jun Final Trade Balance: $108M v $555M prelim
– (MX) Mexico July Consumer Prices M/M: 0.5% v 0.5%e; Y/Y: 3.6% v 3.5%e; CPI Core M/M: 0.2% v 0.2%e
– (UK) July NIESR GDP Estimate: 0.6% v 0.1% prior

– Markets are bouncing higher this morning after yesterday’s market meltdown. Asian indices continued the slide overnight, but halfway through the European session equities began reversing course. The improved sentiment comes ahead of the FOMC later this afternoon, and while more accommodative language is expected, few expect to see more accommodative policy. Note that China economic data is very much in focus this morning, as July industrial output grew at a slower pace and the annualized inflation rate picked up to 6.5% in July. In the US session, bargain hunters have stepped in to buy, figuring that nothing has really changed since Friday’s move by S&P. The DJIA poked back above 11,000, while the S&P500 is just above the 1,148 level that played a key role yesterday afternoon. Volumes are very heavy, while the VIX is still over 40. Spot gold is almost $50 of its overnight all-time highs, around $1,730. US Treasury prices are lower, but only modestly considering the recent gains. The 10-year yield remains below 2.4% ahead of the first of this week’s three coupon auctions scheduled for this afternoon.

– Shares of Liberty Interactive and Liberty Media Holding are both up sharply this morning after reporting excellent profit growth. Live Nation crushed profit expectations on solid revenue. LSTZA is up 5%, LINTA is up 6% and heading higher, and LYV is up 12%, down from the 20% pre-market gain. Cablevision and DISH Network are both down after delivering lower-than-expected earnings. CVC’s Optimum system held up membership levels, while DISH saw a real slump in net adds. DISH is down 3%, while CVC is down 10%. AOL’s profits took a turn for the worse in Q2, thanks to softness in the firm’s online advertising markets. AOL is down 15%. Game designer Take Two missed top- and bottom-line expectations, although it also reaffirmed its full-year outlook, keeping shares of TTWO flat on the day. MGM’s quarterly loss was a bit better than expected, and the firm said business in Las Vegas continues to bounce back.

– The sense of panic appeared to dissipate in the early as FX dealers looked for possible coordinated policy measures from the G7. However there is a chance that the decision from today’s FOMC could very well underwhelm the market. Dealers note that Bernanke was likely to discuss further preemptive measure but to announce nothing today and would not rule out further declines in equities prices and a weaker USD.

***Looking Ahead***

– 11:30 (US) Treasury to sell 4-Week Bills
– 13:00 (US) Treasury to sell $32B in 3-Year Notes
– 14:15 (US) FOMC Interest Rate Decision: Expected to leaves interest rates unchanged at 0.25%
– 16:30 (US) Weekly API Energy Inventories
– 22:00 (CH) China July Trade Balance: $27.4Be v $22.3B prior

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