Trade the News Update Market Internals Update at 15:30ET

Dow -44  S&P -6.5  NASDAQ -16

**Economic Data***

– (US) ICSC/GS weekly chain store sales w/e Aug 13th: -1.5% w/w; +3.5% y/y
– (RU) Russia July Producer Prices M/M: -1.0% v +0.5%e; Y/Y: 16.1% v 19.2%e
– (CA) Canada Jun Manufacturing Sales M/M: -1.5% v -0.7%e
– (US) July Import Price Index M/M: +0.3% v -0.1%e; Y/Y: 14.0% v 13.4%e
– (US) July Housing Starts: 604K v 600Ke; Building Permits: 597K v 605Ke
– (US) Redbook Retail Sales w/e Aug 13th: +4.7% y/y; Aug MTD: +0.6% v July
– (BE) Belgium Jun Trade Balance: -€22.1M v -€307.7M prior
– (US) July Industrial Production: 0.9% v 0.5%e; Capacity Utilization: 77.5% v 77.0%e
– (EU) ECB drained €96.0B vs. €96.0B Targeted in 7-Day Term Deposits
– (FR) France sold approx €7.5B vs. €7.5B indicated in 2-month, 3-month and 6-month Bills

– European equity indices dipped lower in today’s session following several weak preliminary GDP reports from European nations, most notably Germany. US futures ticked lower with Europe and lost ground in the first 30 minutes of trading. Note that just before the open, July Industrial production and capacity utilization were better than expected, thanks mostly to recovery in the US auto industry. In addition, Fitch affirmed the United States’ AAA credit rating, following Moody’s vote of confidence in the US AAA rating on August 2nd. However, Fitch also warned that failure by the Congressional super committee to reach agreement on at least $1.2T of deficit-reduction measures would likely result in negative rating action. Traders continue to wait for headlines out of the summit between French President Sarkozy and German Chancellor Merkel, which should begin to arrive just after 12 noon. Spot gold remains elevated, trading around $1,787. Crude is a bit lower after five solid sessions of gains, trading just shy of the $87 handle. Treasury prices a bid up marginally keeping the long bond yield below 3.75%.

– Walmart only just met the Street’s targets in its Q2 report, on flat overall US comps and an yet another quarter of negative Walmart store comps. The company reiterated its goal to return to positive SSS by the end of the year. Executives stressed Walmart’s commitment to low prices and widening the product price gap over competitors, following analyst reports in recent weeks that suggested those gaps have narrowed in areas such as food. Home Depot slightly topped earnings expectations in its Q2 and adjusted its FY11 outlook slightly higher for the second time this year. Comps were strong in Q2 and executives said that August comps have been quite positive so far. TJX Companies were right in line with consensus Q2 views, and the company nudged its FY11 outlook slightly higher. Saks lost less than expected in its Q2, although it warned that comps would not likely be as strong in the second half of the year as they have been in the first half. Shares of HD are up 5.5% and WMT is up 3.5%. TJX is flat on the session, while SKS is down 3%.

– FX trading in the US session was quiet ahead of the Merkel-Sarkozy press conference. The greenback was off its morning highs and holding steady around the 1.44 handle. Some dealers were discussing chatter of a 1.40-1.45 option defense in the pair currently. The Swiss Franc was firmer on continued risk aversion concerns after the European GDP data earlier today. There is also a chance that the SNB could disappoint tomorrow the alleged peg to the euro. USD/JPY remains dangerously close to historic lows but little changed from its opening levels in Asia. Spot gold gave back the bulk of its session gains after rating agency Fitch affirmed the US sovereign rating at AAA with a stable outlook.

***Looking Ahead***

– (PD) Poland July YTD Budget Level (PLN): No est v -20.4B prior
– 11:00 (US) Fed to purchase USD2.5-3.0B in Notes/Bonds
– 11:30 (US) Treasury to sell 4-Week Bills
– 12:30 (FR) German Chancellor Merkel & French President Sarkozy press conference scheduled
– 16:30 (US) API Weekly energy inventories

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