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NFP for August 3!

As the first Friday of the month approaches, traders and economists will be dusting off their crystal balls in anticipation of the release of the July Non-farm payrolls report. Current estimates are for payrolls to have increased by between 130,000 and 140,000 jobs last month after increasing by 132,000 in June. The unemployment rate is expected to have remained steady at 4.5%. Average hourly earnings (a measure of wage inflation) are expected to have increased by 0.3%. Traders will also look for any revisions to the May and June employment numbers to gauge the trend in payrolls. They’ll need to set those alarm clocks early again – the Labor Department releases the July payrolls report at 7:30 AM Chicago time on Friday.

Coffee Futures Perk Up!

New York Coffee futures soared this morning, moving above the key 50- and 100-day moving averages as local and speculative buying triggered buy stops above recent highs. A rally in the London Robusta futures this morning added spillover support to the N.Y. Arabica futures. Government subsidies are allowing Brazilian growers to hold back new-crop Coffee supplies in the hopes of higher prices later in the year, when roasters start to accumulate inventories to meet winter demand. The Brazilian Green Coffee Exporters Council reported preliminary figures for Brazilian Coffee exports for the August 1st period at 59,117 60-kg bags versus 37,110 bags this time last month. 117.95 is seen as the next resistance point for September Coffee, with support found at the 20-day moving average at 112.30. September Coffee closed at 116.20, up 3.10.


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NFP for July comes in below estimates!

U.S. job growth slowed in July, rising by only 92,000 jobs, as the decline in manufacturing and construction jobs offset some of the gains in the service sector. The unemployment rate rose by 0.1% to 4.6%, and average hourly earnings rose by $0.06 cents, or 0.3%, to $17.45. The Labor Department also revised the June and May payroll figures lower by 6,000 and 2,000 jobs, respectively. Just after the figures were released, the September mini-S&P 500 futures are now lower by 5.25, to stand at 1476.50, and September 10-year Notes are trading at 107-180, up 0-030.

Early Stock Index Rally Fades as Worries Persist

U.S. Stock Index futures closed higher this afternoon, but well off the day’s highs, as traders continue to fear that the economy will show signs of slowing due to continued concerns over credit conditions and a weak U.S. housing market. September S&P 500 futures closed at 1454.60, up 3.60, and September Dow Jones futures closed at 13255, up 18. Treasury futures staged a late rally, with September Bond futures ending the session up 5/32 to settle at 109-15. Traders will be looking towards tomorrow’s PPI figures, with the consensus estimate for a 0.1% rise, and the “core” rate without food and energy prices up 0.2% in July.

Economic Data Scheduled for Tuesday, August 14, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July PPI (Consensus 0.1%, Core 0.2%)
7:30 AM: June Trade Balance (Consensus -$61.0 billion)

Canada
None

U.K.
3:30 AM: July CPI MoM (Consensus -0.2%)

European Union
1:00 AM: (Germany) 2nd qtr GDP (Consensus 0.4%)
4:00AM: 2nd qtr GDP MoM (Consensus 0.5%)

Japan
None


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Economic Report Highlights 08/14/2007

July Producer Prices increased by 0.6%, led by a strong increase in energy prices. This was higher than the pre-report estimate of 0.2%. However, the “core” index, which excludes energy and food prices, rose by a less-than-expected 0.1%.

The U.S. trade deficit for June narrowed to $58.1 billion, the lowest figure since February, as U.S. exports of industrial supplies helped to offset rising crude Oil imports.

Mike Zarembski, Senior Commodity Analyst

Commodities Crash, But For How Long?

It was hard to find much green on the commodity quote boards today as liquidation selling pummeled nearly every commodity sector. Some of the highlights (or lowlights): December Cotton closed down the 300-point limit, September Lumber was down 9.50, November Soybeans were down 40 cents, December Gold was down $21.40, October Live Cattle was down 2.07, September Crude Oil dropped $2.33, and the list went on an on. The continuing shakeout from the credit crisis has spurred a flight to liquidity, with traders and investors looking to seek refuge in short-term government debt. Fundamentals were largely ignored in many markets, as forced liquidation of positions took center stage with margin calls looming. However, as of 2:46 PM Chicago time, the S&P 500 futures have staged a bit of a rally, and if they can finish unchanged or higher, we may see a different outcome in the commodity markets tomorrow.

Soybean futures were hit hardest in the grain complex sell-off this afternoon, with the most-active November contract falling the 50-cent limit at one point in the session to its lowest levels since mid-May. The entire commodity complex had been under pressure today due to the continued rush for liquidity in the wake of recent financial turmoil. Also weighing on the Soybean products was the improved chances for rainfall in the Midwest, including previously parched sections of the region. U.S. weekly Soybean exports came in at 313,300 metric tons for the week ending August 9th, with 236,000 mt for the 2006-07 marketing year. Soy products were not immune from the sell-off, as December Bean Oil posted triple-digit losses on the back of sharply lower Crude and Malaysian Palm Oil futures, and December Soy Meal broke through near-term resistance at the 20- and 100-day moving averages. The next support point for November Soybeans is seen at the psychologically important $8.00 level, with resistance found at the 100-day moving average of $8.34. November Soybeans closed at $8.14 ½, down 40 cents.


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Business Spending a Bright Spot on a Rainy Day in Chicago!

Durable Goods Report: It appears that business spending remains unaffected by the U.S. housing slump, as durable goods orders for July rose by a sharply higher 5.9% versus pre-report estimates of only a 1.0% gain. Excluding transportation equipment, durable goods orders rose by 3.7%, the highest in nearly two years. September Treasury Bond futures fell as low as 110-15 after the figures were released, but have recovered earlier losses and are now trading near unchanged levels. New Home Sales for July are set to be released at 9:00 AM Chicago time (consensus 825,000).

Mike Zarembski, Senior Commodity Analyst

NASDAQ Refuses to Budge

While the Dow dropped 50 points and the S&P lost 6, the NASDAQ refused to give in to the bears today, closing with a 2-point gain. Bonds had another positive day, as the 10-year Note finished with a 4.51% yield.

Initial Claims surprised traders today with a 334,000 post versus expectations of only 320,000. The help wanted index, however, came in right at expectations at 25.

Traders will be anxiously awaiting comments from Federal Reserve Chairman Ben Bernanke tomorrow, in addition to Personal Income, Personal Spending, and PMI.

Across the Pacific, the Nikkei closed up .88% and the Hang Seng ended its last trading session ahead by 2.02%.

Economic Data Scheduled for Friday, August 31, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: Personal Income for July (Consensus 0.3%)
7:30 AM: Personal Spending for July (Consensus 0.3%)
7:30 AM: Core PCE Inflation for July (Consensus 0.2%)
8:45 AM: Chicago PMI for August (Consensus 53.0)
9:00 AM: Factory Orders for July (Consensus 3.0%)
9:00 AM: University of Michigan Consumer Sentiment for August (Consensus 83.0)

Great Britain
4:30 AM: Gfk Consumer Confidence for August (Consensus -7)

Canada
None

European Union
4:00 AM: Consumer Confidence for August (Consensus -2)
4:00 AM: Unemployment Rate for July (Consensus 6.9%)
1:00AM: (Germany) Retail Sales for July MoM (Consensus 0.5%)

Japan
None

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Bulls First to Arrive at the Post-Labor Day Party

School is back in session today and so are the bulls on Wall Street. The Dow gained 91 points, with the S&P adding 15, and the NASDAQ tacking on 33. Although the S&P couldn’t quite hit the 1500 level for the first time since August 8th (the high was 1496), it was a positive day nonetheless. The optimistic vibes carried over to government bonds as well, with the 10-year Note ending the day with a 4.55% yield.

In the news, construction spending came in below expectations at -.04% (-.01% was the consensus). Tomorrow, traders will be processing automobile sales figures, which come out tonight at 5:00 PM Eastern time. In addition, we can look forward to Pending Home Sales, the Fed’s Beige Book, and Crude Oil inventories tomorrow.

Overseas, the Nikkei dropped .63%, while the Hang Seng remained generally flat with only a .08% drop.

Economic Data Scheduled for Tuesday, September 5, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: Pending Home Sales for July
1:00PM: Fed’s Beige Book

Great Britain
3:30 AM: Purchasing Managers Index (services) for August (Consensus 56.5)

Canada
8:00 AM: BoC Interest Rate announcement (Consensus 4.5%)

European Union
2:55 AM: (Germany) Purchasing Managers Index (services) for August (Consensus 58.1)
3:00 AM: Purchasing Managers Index (services) for August (Consensus 57.9)
4:00 AM: Retail Sales for July (MoM) (Consensus 0.3%)

Japan
None

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August Jobs Report Highlights

4,000 jobs were LOST in August versus expectations of a 100,000-120,000 gain

Unemployment rate remained steady at 4.6%

Average hourly earnings rose by $0.05 to $17.50 per hour – a 0.3% rise

July payrolls were revised to 68,000 versus 92,000 originally estimated


Mike Zarembski, Senior Commodity Analyst

Fed Surprises Traders with a 50 Basis Point Cut in the Fed Funds Rate!

The Federal Reserve lowered rates by 50 basis points to 4.75% to help mitigate the economic effects of a weak U.S. housing market and short-term credit crunch. The Fed also lowered the discount rate by an equal amount to 5.25%. Today’s aggressive move by the Fed demonstrates its concern over potential disruptions in the financial markets, and appears to make the statement that the Fed will do what is necessary to prevent a spillover to the overall U.S. economy. The Fed also noted that “readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and will continue to monitor inflation developments carefully.” The initial reaction in the markets included a sharp rally in Stock Index futures, with e-mini S&P 500 futures posting gains of over 30 points in the immediate wake of the Fed announcement. Metal futures also rallied, along with the Euro currency. Meanwhile, the Dollar, Japanese Yen, and 30-year Bond futures all posted steep losses.

Mike Zarembski, Senior Commodity Analyst

Fed Ignites Futures Traders With Surprising 50 Basis Point Rate Cut!

It was a wild afternoon for futures traders, especially after the Federal Reserve surprised some traders by lowering the Fed Funds rate by an aggressive 50 basis points to 4.75%. The FOMC vote was a unanimous 10-0 for the rate cut. The Fed also lowered the Discount Rate by 50 basis points to 5.25% – the second such cut in a month’s time. The news sparked an aggressive rally in Stock Index futures, with e-mini S&P 500 futures up well over 30 points at the peak. Bulls were also stampeding over to the metals sector, with December Gold trading over $730 per ounce, and December Silver leaping by nearly 25 cents. The energy complex was also sharply higher, with October Crude Oil futures moving above the $82.00 level for the first time. However, the cut was bad news for the U.S. Dollar, with the December Dollar index falling over 50 ticks at one point, as traders punished the greenback and the Japanese Yen. Long-term interest rate futures also posted sharp losses this afternoon. Traders now expect further interest rate cuts are in the offing, with March 2008 Eurodollar futures pricing in a 100% chance of a 4.5% Fed Funds rate by the first quarter of 2008, and an 88% chance of a 4.25% rate.

Mike Zarembski, Senior Commodity Analyst

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Economic Calendar

Economic Data Scheduled for Wednesday, September 19, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: CPI for August (Consensus 0.0%. Core 0.2%)
7:30 AM: Housing Starts for August (Consensus 1345K)
7:30 AM: Building Permits for August (Consensus 1350k)
9:30 AM: EIA weekly Energy Stocks Report – week ending 9/14

Great Britain
3:30 AM: Bank of England Minutes

Canada
6:00 AM: CPI for August (Consensus 0.1%)

European Union
1:00 AM: (Germany) PPI for August (Consensus 0.1%)

Japan
10:00 PM: BOJ Interest Rate Decision
12:00 PM: Leading Economic Index for July (Consensus 72.7)

Economic Calendar

Economic Data Scheduled for Thursday, September 20, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Initial Jobless Claims – week ending 9/15 (Consensus 320k)
9:00 AM: Leading Indicators for August (Consensus 0.0%)
11:00 AM: Philadelphia Fed (Consensus 2.5)

Great Britain
3:30 AM: M4 Money Supply for August (MoM) (Consensus 0.8%)
3:30 AM: Retail Sales for August (MoM) (Consensus 0.0%)

Canada
None

European Union
None

Japan
None

Economic Calendar

Economic Data Scheduled for Friday, September 21, 2007
(All times in U.S. Central Time)

U.S.
None

Great Britain
None

Canada
7:30 AM: Retail Sales for July (MoM) (consensus 0.0%)

European Union
3:00 AM: PMI Manufacturing for September (consensus 53.9)
3:00 AM: PMI Services for July (consensus 57.6)

Japan
None

Economic Data Scheduled for Monday, September 24, 2007

(All times in U.S. Central Time)

U.S.
None

Great Britain
None

Canada
None

European Union
4:00 AM: Industrial New Orders for July (MoM) (Prior 4.4%)

Japan
6:50 PM: Bank of Japan minutes

Summary and Reaction to this Morning’s NFP Report

As expected, September non-farm payrolls rebounded, slightly beating expectations with a gain of 110,000 jobs for the month. The unemployment rate jumped by 0.1% to 4.7% and average hourly earnings rose by $0.07, or 0.4%, to $17.57 per hour. In addition, the August payrolls figure was revised upward to 89,000 jobs created, well above the 4,000 lost originally reported. Manufacturing jobs declined yet again – this time by 18,000 jobs – while the construction industry also lost 14,000 jobs in September. The service sector showed the biggest jump in hiring, with 143,000 jobs added.

Market reactions after the report include a sharp drop in Bond prices, with December 30-year Bonds down 0-25, at 111-10. Stock indexes reacted favorably, with the December e-mini S&P 500 up 10.75 to stand at 1563.00. The U.S. Dollar was sharply higher against both the Euro and Yen, and Gold prices fell sharply.

Mike Zarembski, Senior Commodity Analyst

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USDA Results

Corn – The Corn figures were very bullish, with production coming in at 13.074 billion bushels, well below the 13.109 billion bushel consensus estimate. Both yield and carryout numbers were also well below forecasts, with yields coming in at 151.1 bpa versus estimates of 152.3 bpa and carryout pegged at 1.438 billion bushels versus estimates of 1.698 billion. The early call is 8-10 cents higher, but we may see 10-15 cents higher by the open.

Wheat – The Wheat number may be the most surprising of today's USDA figures. Winter Wheat seedings were 46.61 million acres total, below the consensus guesstimate of 48.657. The hard red crop was actually below last year's figure, coming in at 32.5 million acres versus last year’s 32.94 million acre figure. The early call is about 20 cents higher, but we may see the market open close to limit up, especially in KC.

Soybeans – Bean figures came in a little higher on the production and carryout numbers, while yields were in line with forecasts. The report is neutral to slightly bearish, but the Bean complex is expected to open higher on the coattails of the bullish Corn and Wheat figures. Production came in at 2.585 billion bushels versus estimates of 2.584 billion, while carryout was pegged at 175 million bushels versus estimates of 170 million. The early call is 5-7 cents higher.

Rob Kurzatkowski, Commodity Analyst

Stocks Jump, Gold Melts Down on PMI Data

Stocks reacted favorably to the Chicago PMI report, which registered a 48.2, trumping consensus estimates of 46.0 percent. The news triggered a six-point jump in e-mini S&P futures and Gold futures pared earlier gains, as the precious metals market loses some of its luster as a safe haven. Signs that economic conditions are improving could have a negative impact on Gold, as traders have priced in further rate cuts, which may not be necessary to stimulate the economy. While the report was better than expected, it still indicates that the economy is contracting, but perhaps at a slower pace than previously thought. Traders will keep a close eye on tomorrow’s release of the ISM Manufacturing Index, which could offer further confirmation that economic conditions will be improving. If the ISM report contradicts the PMI report, today’s data could simply be taken as a slight regional improvement.

Rob Kurzatkowski, Commodity Analyst