Trade the News Market Internals Update at 14:00ET

Dow +115 S&P +5.7 NASDAQ -6.4

***Economic Data***

– (TU) Turkey Sept Industrial Confidence: 112.4 v 109.8 prior; Capacity Utilization: 76.2% v 75.8%ev 76.1% prior
– (US) Aug Chicago Fed National Activity Index: -0.43 v -0.40e
– (MX) Mexico Aug Preliminary Trade Balance: -$806M v -$870Me
– (US) Aug New Home Sales: 295K v 294Ke
– (US) Sept Dallas Fed Manufacturing Activity:-14.4 v -8.0e
– (IS) Israel Central Bank cuts Base Rate by 25bps to 3.00%, Not expected (was expected to hold)
– (EU) ECB completed €4.0B in weekly settlements vs. €9.8B prior in its Gov’t Bond Buying Program (SMP); To drain €156.5B in next 7-day Term Deposit Facility vs. €152.5B prior

– Conflicting commentary out of European officials in regards to the potential for an ECB rate cut and expansions to the EFSF has made for volatile trading this morning. Following widespread rumors last week, ECB governors hinted during the European session that a rate cut might be looked at during the October policy meeting. US futures gained a bit in the premarket, however indices are pivoting around unchanged in the first hour of trade. The VIX remains elevated around 42 in a sign of the tension in markets. Precious metals got shellacked overnight following another CME margin hike announced on Friday evening but have rebounded. Note that the August New Home Sales data show the US housing market bumping along the bottom, while the September Dallas Fed index was very weak, although interestingly the employment subindex indicated that hiring has increased. The CME increased gold margins by 21%, silver by 16% and copper by 18%; at one point, spot gold dipped as low as $1,535, before retesting $1,600. The collapse in silver has been even more dramatic. Fed governor Bullard once again outlined his dissident stance this morning, commenting that the Fed needs to use counter-cyclical interest rate policy to cure the US economy, noting that zero rates are the way to become like Japan. Treasury prices are under a little pressure in the weeks initial session. The 10-year is off roughly a quarter point to yield 1.86%.

– McGraw-Hill disclosed this morning that the SEC may charge its Standard & Poor’s unit with violating securities laws in its ratings for a mortgage bond in 2007. The SEC investigation comes as the company is getting ready to split into two publicly-traded companies, one holding Standard & Poor’s and the other holding its textbook publishing company. Back in June, there were reports that the SEC was considering civil fraud charges against credit-rating agencies in relation to the role they played in mortgage-bond transactions. Shares of MHP and Moody’s are both down 2% or so this morning.

– The buyback train keeps rolling as boards look to bolster share values. Berkshire Hathaway authorized a repurchase program for both its class A and class B shares. The company said it would buy back at prices no higher than a 10% premium over the current book value of the shares. Additionally, repurchases will not be made if they would reduce Berkshires consolidated cash equivalent holdings below $20 billion. Dollar Thrifty said it would buy back up to $400M in shares (approx 23% of market cap). The firm also offered a strong outlook for its Q3. Freescale became the latest semi name to slash Q3 guidance, steeping its projected revenue losses due to market weakness.

– EUR/USD has come off its New York session highs following comments out of the ECB’s Mersch, who commented on the potential for an ECB rate cut. Mersch said that a rate cut had not been completely ruled out and clarified that any cut would be triggered by a clear deterioration of the economy. Overall dealers are saying that the euro would continue to be sold into strength should no concrete results be forthcoming from politicians. The current focus among FX dealers is a Tuesday meeting between German Chancellor Merkel and Greek PM Papandreou. Dealers were saying that Merkel cannot get key legislative items accomplished until things get worse, so she will be forced to wait and do nothing.

***Looking Ahead***

– (AR) Argentina Sept Consumer Confidence: No est v 57.5 prior
– 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
– 12:00 (FR) France Net Change Jobseekers: +33.1Ke v +36.1K prior; Total Jobseekers: 2.90Me v 2.757M prior
– 15:00 (US) Fed’s Kocherlakota speaks on Debt Panel in Chicago

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