Daily Market Commentary for September 30, 2011

Per St. Louis Federal Reserve President James Bullard, the Federal Reserve has potent tools at its disposal to help the economy and is never out of ammunition. (read more at Millennium-Traders.Com) http://www.millennium-traders.com/ne...ommentary.aspx

Hasta lavista baby to September - lets bring on a fresh quarter beginning with October!

First cantaloupe, now 2,498 cartons of chopped and shredded lettuce has been recalled by grower True Leaf Farms over concerns it might be contaminated with listeria. According to True Leaf Farms, the packaged lettuce bears a "use by" date of Sept. 29, 2011 and was shipped largely to food-service distributors in 19 states and Alberta, Canada. Only grocery outlets receiving the product, which is sold in 2-lb. bags, were Unified Grocers Inc.'s Cash & Carry Smart Food Service stores located in Oregon, Washington, and Idaho. Recently, health officials called for a widespread recall of cantaloupe over listeria contamination concerns with at least 72 cases of illness, including 16 deaths which have been linked to the contaminated cantaloupe. Listeria is a disease that can penetrate and replicate inside human cells. Most people that are infected have few or no symptoms. When symptoms are present, they usually consist of fever, muscle aches, nausea, or diarrhea. Symptoms may not be appear - up to 60 or more days from the time of the actual consumption.

Concerns over China’s shadow banking system were back in focus after Credit Suisse characterized the rapid growth of informal lending by China as a “wild wave” and warned of dire economic consequences if the government didn’t move quickly to rein it in. In blunt language, the investment bank’s Hong Kong-based analysts likened the situation to a “time bomb,” saying a potential crisis in the unregulated sector ranks as a bigger risk to the Chinese economy than the debt situation involving local governments which is an area many economists have pegged as vulnerable to China’s lending-stimulus hangover. The estimated size of China’s informal lending is up to 4 trillion Yuan ($625.2 billion), equivalent to nearly 8% of above-board bank lending and is said to be expanding at an annual rate of nearly 50%. Approximately 60% of these informal loans have gone into the property market, mainly to help finance small and medium-sized real estate developers. Portions of the funds could have been pooled into specific real estate projects, although the size of such investments were relatively small. China’s central bank deliberately created the shadow banking system several years ago as they did so in the belief that a more sophisticated and more mature economy needs channels of credit in addition to formal bank lending.

The Commerce Department reported personal income declined during August. Consumer spending slowed with personal income falling 0.1% in August, striking the largest decrease since October 2009. Americans dipped into their savings to spend during August as their incomes fell for the first time in almost two years. During August, consumer spending rose 0.2% after a 0.7% gain in July. Real consumer spending during August, adjusted for inflation, was flat. During August, savings rate fell to 4.5% from 4.7% in July which was the smallest savings rate since November 2009. Additionally in August, wages and salaries fell 0.2% and, excluding inflation, real disposable incomes fell 0.3% the biggest drop since November 2009. The personal consumption expenditure price index, which is the Fed's favorite measure of inflation, rose 0.2% during August compared with July and is up 2.9% in the past year. Core PCE rate rose 0.1% in August which was weaker than the 0.2% gain forecast with core PCE index being higher by 1.6% year-on-year. The data underscores “that we have too many people out of work, not enough consuming ... and until we put people back to work, we are not going to have robust economic growth,” said Richard Fisher, president of the Federal Reserve Bank of Dallas.

According to reports, the Institute for Supply Management-Chicago activity index, manufacturing activity in the Chicago region expanded at a more rapid pace in September. The Chicago purchasing managers index rose to 60.4 from 56.5 during August with an unexpected rise.

University of Michigan consumer sentiment rose to 59.4 in September after tumbling to a nearly three-year low 55.7 during August. A preliminary reading released earlier this month estimated a sentiment level of 57.8 for September. The sentiment reading which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the start of the most recent recession. The final reading for September showed that sentiment rose to 59.4 from 55.7 in August, which was the lowest level since November 2008. A preliminary reading released earlier this month estimated a sentiment level of 57.8 for September. The sentiment reading which covers how consumers view their personal finances as well as business and buying conditions, averaged nearly 87 in the year before the start of the most recent recession. The survey’s gauge of views on current conditions increased to 74.9 in September from 68.7 in August with expectations gauge increasing to 49.4 from 47.4. One-year inflation expectations declined to 3.3% from 3.5%.


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