Bison Wealth Management, LLC.

First time jobless claims fell 26,000 to 550,000 for the September 5 week.  The four-week average was down slightly from previous week’s 572,750 to 572,000. 

In July, the country imported $159.6 billion worth of goods and exported $127.6 resulting in a trade deficit of $32.0 billion.  Exports have gradually increased the past three months and recent weakness in the dollar may spur more exports.

Texas Instruments (TXN) raised its outlook for earnings and sales in the third quarter.  The company said it expects earnings of 37 cents to 41 cents a share, compared to a previous forecast range of 29 cents to 39 cents a share.  Revenue is now expected to be between $2.73 billion and $2.87 billion, compared to a previous range of $2.5 billion to $2.8 billion.

Monsanto Co. (MON) said that 2009 ongoing earnings will come in at the low end of its estimated range of $4.40 to $4.50 a share.

Procter & Gamble (PG) confirmed its previous guidance for organic sales growth of 1% to 3% for fiscal 2010, with net sales in the range of flat to up 3%.

General Mills Inc. (GIS) said its current estimate of first-quarter earnings for the three months ended Aug. 30 exceeds internal plan targets.  Results will be reported on September 23.

Nonfarm payrolls for August fell 216,000 and the unemployment rate increased to 9.7 percent from 9.4 percent in July.  The Education and Health Services sector added 52,000 jobs, but every other sector was negative.  Manufacturing shed 65,000 jobs in August compared to a loss of 43,000 in July.

Average hourly earnings inched up by 0.3 percent in August.  The increase is largely due to the raising of the minimum wage.  The average work week held steady at 33.1 hours.

Overall, many people remain out of work.  This will mostly likely keep a lid on consumer spending for the next couple of quarters. 

The "Cash For Clunkers" program ends today.  It remains to be seen if the temporary boost in demand will last after the end of the program.

Procter & Gamble (PG) is selling its global pharmaceuticals business to Warner Chilcott (WCRX) for $3.1 billion.

Reports coming out this week include Consumer Confidence, Durable Goods, New Home Sales, and GDP. 

There have been several reports out recently showing improvement in the housing market.  However, there is also evidence that foreclosures are increasing for homeowner's with higher quality credit and more are falling behind on monthly payments.  This tug-of-war will continue in the housing market, and continue to put stress on consumer budgets. 

The Federal Open Market Committee starts their two-day meeting today to discuss monetary policy.  Their decision on interest rates will be announced tomorrow afternoon. 

China reported that exports in July rose by 10.4 percent from June.  July imports also improved by 8.7 percent from the previous month. 

Later this morning, non-farm productivity and labor costs for the second quarter will be released.  It is expected that productivity will increase and labor costs will drop as businesses cut costs and layed off employees during the quarter.

Auto sales increased by 15 percent in July to an annual rate of 8.3 million from 7.1 million in June.  The rise is attributed to the “cash for clunkers” program.

The ICSC-Goldman Store Sales report was lower by 0.2 percent for the August 1 week.  Year-on-year (YOY) sales are off 0.7 percent.  Redbook had a year-on-year change of -5.4 percent for the same period.

Personal income for June was down 1.3 percent for a year-on-year change of -3.4 percent.  Consumer spending increased for the month by 0.2 percent for a YOY drop of 2.2 percent.  Inflation was up 0.5 percent for the month with due mostly to rising energy costs. 

Over the past few days, the “cash for clunkers” program has gained a lot of attention as it has hit its maximum.  Transportation Secretary LaHood stated yesterday that unless the Senate approves another $2 billion for the program, that it will be terminated on Tuesday.  It is estimated that 200,000 or more cars may have been purchased. 

Since January, the U.S. auto industry has averaged annual car sales just under10 million vehicles (8/3/09 WSJ, 'Clunkers' Rebates at Risk Unless Senate Acts).  Earlier in the decade this number was closer to 16 million.  Later today, we will get reports on auto sales. 

Will this pick-up in demand spark auto manufacturers to increase supply and put more employees back to work?  It is difficult to say.  Without the clunkers program demand may decrease to previous levels. 

Another interesting development is the sudden jump in the stock market.  Money is coming off the sidelines and out of Treasuries.  As money flows back into equities, we are seeing a decrease in the price of Treasuries and a move upwards in rates.  The 10-year Treasury is over 3.50 percent, and this will cause mortgage rates to rise.  The rise in rates could dampen the recovery in the housing markets as consumers are also being faced with rising commodity prices.

While we have seemed to have reached a bottom in some sectors, the consumer is still walking a tightrope.  Without an increase in jobs and income for families, it is difficult to say if all of this good news is “artificial” and short-term, or if it will lead to long-term consumer demand and the path to a strong recovery.

GDP for the second quarter fell by 1.0 percent.  GDP for the first quarter was revised downwards to 6.4 percent from 5.5 percent.  Lean inventories will probably result in a pickup in production going forward.

Initial jobless claims increased by 25,000 to 584,000 for the July 25 week.  Continuing claims fell by 54,000 to 6.197 million. 

Exxon Mobil (XOM) reported second-quarter net income fell 66% to $3.95 billion, or 81 cents a share, from $11.68 billion, or $2.22 a share in the year-ago period.

Kellogg (K) earned $354 million, or 92 cents a share, compared to $312 million, or 82 cents a share, in the same period a year ago.  Sales fell to $3.2 billion compared to $3.3 billion.

Colgate-Palmolive (CL) reported a second-quarter profit of $561.6 million, or $1.07 per share, from $493.8 million, or 92 cents per share, a year earlier.

MBA Purchase Applications were flat for the July 24 week to 262.0 from 262.1 from the previous week.  The refinance index fell 11 percent to 1,862 for the week.  The average rate for a 30-year fixed mortgage increased 5 basis points to 5.36 percent.  While new home construction rose in June (released on Monday) the purchase applications index has remained mostly flat.

For June, new orders for durable goods fell 2.5 percent.  The transportation component declined 12.5 percent for the month.  Excluding transportation, new orders rose by 1.1 percent.  For the year-on-year comparison new orders have declined 26.8 percent.

Microsoft and Yahoo struck deal on Internet search in which Microsoft (MSFT) will power Yahoo's search tool while Yahoo (YHOO) will become the exclusive sales force for both firms' premium search advertisers.  Terms are for 10 years, in which Microsoft will license Yahoo's core search technologies, and Microsoft's Bing will become the exclusive algorithmic search and paid search platform for Yahoo sites.  Yahoo sees the deal lifting annual operating income by around $500 million.

Yesterday, the markets were up based on the housing data.  Existing home sales for June rose by 3.6 percent to a 4.89 million annual rate.  The year-on-year change was at -0.2 percent.  The supply in housing improved to 9.4 months from 9.8 months. 

In earnings news:

Microsoft Corp. (MSFT) reported fiscal fourth-quarter net income fell to $3.05 billion or 34 cents a share, from $4.3 billion or 46 cents a share in the same period a year earlier. Revenue fell 17% to $13.1 billion.

Schlumberger's (SLB) reported a 57% drop in net income to $613 million, or 51 cents a share from $1.4 billion, or $1.16 a share.  SLB also took a 7 cents-a-share charge for severance costs.  Quarterly revenue dropped to $5.53 billion from $6.75 billion.

Second quarter earnings at Amazon.com (AMZN) fell 10% from the same period last year, in part due to a charge related to a recent settlement.  Amazon reported net income of $142 million, or 32 cents a share, down from $158 million, or 37 cents a share, a year earlier.  Revenue rose 14% to $4.65 billion.

American Express Co. (AXP) and Capital One Financial Corp. (COF) both reported big declines in quarterly results as the credit card giants continued to be hurt by loan losses.  American Express said profit fell 48% to $337 million.  Capital One swung to a loss of $276 million, or 65 cents a share, from a profit of $453 million, or $1.21 a share.

While the housing market continues to see some improvement,  consumers and businesses are still watching how and where they spend their money.  Demand for products will probably stay somewhat flat until consumers feel more secure and start to purchase again. 

The MBA Purchase Applications for the July 17 was mostly flat to 262.1 from 258.8 the previous week.  The refinancing index was up slightly 2,089.7.  Thirty-year mortgages jumped to an average of 5.31 percent from 5.05 percent in the prior week. 

ICSC-Goldman Store Sales rose by 0.5 percent for the July 18 week.  The year-on-year comparison is down 0.3 percent.  The Redbook reported a year-on-year drop of 5.8 percent for the same period.  Redbook has experienced some big swings since Wal-Mart is no longer providing data. 

Coca-Cola Co. (KO) reported a second-quarter profit rise of 43% to $2.04 billion, or 88 cents a share, from $1.42 billion, or 61 cents, a year earlier.  Revenue fell 9% to $8.27 billion from $9.05 billion.

Merck & Co. Inc. (MRK) said it earned $1.56 billion, or 74 cents a share in the latest quarter, compared to $1.77 billion, or 82 cents a share, in the same period a year ago. Sales in the period were $5.90 billion compared to $6.05 billion.

DuPont (DD) reported a 61% drop in second-quarter net income on declining demand for chemicals and other materials used in construction, auto production and consumer goods.  DuPont said it earned $417 million, or 46 cents a share, compared to $1.08 billion, or $1.18 a share, a year earlier.

Caterpillar Inc. (CAT) raised its profit outlook for 2009 to a range of 40 cents to $1.50 a share even as the group reported a sharp drop in second-quarter earnings. Caterpillar said profit in the latest quarter dropped to $371 million, or 60 cents a share, from $1.11 billion, or $1.74 a share, a year earlier.

UnitedHealth Group's (UNH) second-quarter profit rose 9% to $859 million, or 73 cents a share, helped in part by rising premium revenues.  Revenue edged up to $21.7 billion from $20.3 billion. The group also lifted its outlook for the year to $3 to $3.15 a share.

Continental Airlines Inc. (CAL) reported a $213 million second-quarter net loss, hurt by a slump in business traffic and a $50 million negative impact on revenue tied to swine flu, and said it would cut 1,700 more jobs and increase fees. The loss was $213 million, or $1.72 a share, wider than the $5 million, or 5 cents, of the year-earlier quarter.

Leading Indicators rose for June by 0.7 percent and this is the third straight month of increases.  The consumer confidence component was off in the report.

CIT Group (CIT) received $3 billion in temporary financing from major bondholders to avoid filing bankruptcy.  This will buy CIT some time to try and restructure its debt.

Eaton Corp. (ETN) said that its second-quarter net profit fell 91% to $29 million, or 17 cents a share, from $333 million, or $2.03 a share, as it also lowered its guidance for the year.  Eaton said significant destocking had continued in virtually all its segments during the quarter and added end markets are now expected to be considerably weaker than it had forecast. The group cuts its net earnings guidance for the year to a range of $1.65 to $1.85 a share. It had previously forecast earnings per share of $2.10 to $2.60.

Housing starts for June rose by 3.6 percent to 562,000 from the previous month.  Single family housing starts increased by 14.4 percent to 470,000 and multi-family starts fell by 25.8 percent to 112,000.  Housing permits were up by 45,000 or 8.7 percent.

Bank of America (BAC) reported a second quarter profit of $2.42 billion or 33 cents per share on revenue of $32.77 billion.  Part of the gain was from the sale of its stake in the China Construction Bank Corp.  Goldman Sachs (GS) and J.P. Morgan (JPM) also reported quarterly profits this week.

In contrast, General Electric (GE) reported a second quarter income of $2.6 billion or 24 cents per share with revenue falling by 17 percent to $39.1 billion.  Profits for the quarter were off by 49 percent.  GE Capital, the lending arm of the company, posted a profit of $590 million.  This is 80 percent lower than a year ago as the unit continues to struggle with losses from bad consumer loans.

MBA Purchase Applications fell by 9.4 percent to 258.8 in the July 10 week.  The refinancing index increased by 18 percent to 1,707.  The average rate for a 30-year fixed mortgage fell 30 basis points to 5.05 percent.

The Consumer Price Index for June rose by 0.7 percent.  For the year-on-year comparison the CPI is down 1.2 percent.  Core CPI (ex food & energy) was up by 0.2 percent and is also up for the year-on-year at 1.7 percent.  Gains rose in all sub-sectors with energy making the largest price increase.

The Empire State Manufacturing Survey for July was off 0.55 versus -9.41 in June.  A zero reading indicates no change from month-to-month.  A jump in new orders by 5.89 in the month helped with increase for the month.

Industrial Production for June fell by 0.4 percent following a revised 1.4 percent drop in May.  The manufacturing component fell by 0.6 percent for the month.  Capacity utilization is at 68.0 percent and marks another new low for this reading.  For a year-on-year basis industrial production is down 13.6 percent.

The manufacturing sector continues to reports contraction, but at a slower pace than previous months.  The markets are hopeful that this is a sign that we have reached a bottom in manufacturing and that a recovery is underway.  Better than expected earnings from Intel this morning are also seen as positive.  The markets are predicting that the worse may be behind us.

Retail sales for June were up 0.6 percent from May.  Excluding autos, retail sales increased by 0.3 percent.  Excluding autos and gasoline stations, sales dropped 0.2 percent. 

The Producer Price Index increased by 1.8 percent in June and the core PPI was up 0.5 percent for the month.

Business inventories were down 1 percent in May as companies continue to reduce production. 

Overall, consumers have become savers in a short period of time.  Businesses will continue to draw down inventories as demand stays weak and price increases will be difficult to maintain in this environment.

There are no major economic reports due today.  The focus will be on retail sales for June which will be released tomorrow.  Quarterly earnings will be released by many companies this week and may impact the market as companies predict earnings for the next several quarters and into 2010.

ICSC-Goldman store sales were up 0.1 percent in the July 4 week and are up 0.5% for the year-on-year comparison.  The Redbook reported that year-on-year sales were down 4.2 percent for the July 4 week.  On Thursday, chain store sales will be posted for June.  Consumers continue to keep their spending tight and are mostly purchasing consumer necessities.

This week kicks of the start of earnings for the second quarter.  Alcoa reports tomorrow.

Nonfarm payroll employment in June shrank by 467,000.  This follows declines in May for 322,000 and April of 519,000.  The average workweek fell to 33.0 hours versus 33.1 the previous month.  Average hourly earnings were unchanged.  Unemployment rose to 9.5 percent.  Education and health services was the only sector that posted an increase in jobs, every other sector was down.  

Initial jobless claims for the June 27 week declined 16,000 to 614,000.  The four-week average is at 615,250 and this is about 17,000 better than the May average.  Continuing claims for the June 20 week totaled 6.702 million which is down by 53,000 from the previous week.

Factory orders in May increased by 1.2 percent.  New orders for durable goods rose by 1.8 percent and by 0.7 percent for non-durable goods.  Inventories decreased by 0.6 percent, but shipments also fell by 0.9 percent.

Overall, inventories are continuing to come down.  The question is whether or not an increase in new orders will result in an increase in production.  If this happens, then some workers will be called back to the factories.  The housing market continues to struggle and consumers continue to reign in their spending.  We are seeing that there is less negative news and the rate of contraction may be leveling off.  Yet, we are not seeing many big signs of improvement or job creation. 

The second half of the year will probably show some signs of things getting better, but a “V” shaped recovery will most likely not happen.  Until consumers feel more secure about their future and retain gainful employment, we will see weak consumer demand and manufacturers will be reluctant to increase production and continue to cut expenses. 

Mortgage applications for the June 26 week fell by 4.5 percent to 267.7.  The refinancing index was down 30 percent for the week to 1,482.2.  The average rate for a 30-year fixed mortgage declined by 10 basis points to 5.34 percent. 

The Institute for Supply Management’s Manufacturing Index rose by two points to 44.8 in June.  New orders fell by almost 2 points to 49.2.  However, production was up by 6.5 points to 52.5 and inventories were down by 2.1 to 30.8.  A pickup in production and decreasing inventories will help to slowdown the rate of future layoffs.  The Challenger Job Cut report supports this as layoffs decreased in June to 74,393 from 111,182 the previous month. 

Construction spending fell in May by 0.9 percent after a 0.6 percent gain in April.

The pending home sales index was little changed in May at 90.7.  The year-on-year gain improved by 3.2 percent. 

Tomorrow, we will get reports on employment, jobless claims, and factory orders.

The ICSC-Goldman’s store sales report rose 1.6 percent for the June 27 week.  The year-on-year gain is 0.6 percent.  The Redbook posted a year-on-year decline of 4.3 percent for the June 27 week.  Both reports point to weak sales for June.

The Case-Shiller 20-Index was off 0.6 percent in April as home prices continue to fall, but at a much slower pace.  The year-on-year rate has improved slightly to minus 18.1 percent.  This is 0.6 percent better than the prior two months.

Consumer confidence will be out later this morning.

Overall, we continue to see small signs of improvement in some economic reports, but the economy is still struggling and it will probably be a slower recovery than envisioned by many analysts.

No major economic reports are due today.

Bernard Madoff will be sentenced later today and could face 150 years in prison for his Ponzi scheme.

The markets will focus on reports being released later this week which include the employment report for June, consumer confidence, construction spending, and manufacturing reports.

Markets will be closed on Friday.

Personal income in May was up 1.4 percent from April, and much of the increase was provided by temporary fiscal stimulus.  Consumer spending rose by 0.3 percent in May from the previous month.  Wages and salaries slipped by 0.1 percent for the month.

Consumer spending on durable goods rose 0.8 percent, and spending on non-durable goods increase by 0.5 percent.  Overall, the fiscal stimulus is helping consumers as spending increases, but not as much as hoped for as consumers continue to save.

KB Home (KBH) reported a net loss of $78.4 million, or $1.03 a share, compared with a loss of $255.9 million, or $3.30 a share, in the same quarter the prior year.  Revenue fell 40% from the year-ago quarter to $384.5 million.

Initial jobless claims were up 15,000 to 627,000 for the June 20 week.  Continuing claims increased by 29,000 in the June 13 week to 6.738 million.

GDP for the first quarter was revised slightly upward to a contraction of 5.5 percent.  This is up marginally from the previous estimate of -5.7 percent.

The Mortgage Bankers’ Association Purchase Applications Index rose 7 percent in the June 19 week to 280.3 from 261.2 the previous week.  The refinancing index was up 6 percent to 2,116.3.  New home sales for May will be released at 10:00 a.m.

Durable goods orders in May increased 1.8 percent from the previous month, and ex-transportation orders were up 1.1 percent.  For the year-on-year comparison, durables goods are down 23.3 percent and ex-transportation they are off 22.4 percent.

The Federal Reserve will make their policy announcement at 2:15 p.m.

Existing Home Sales rose 2.4 percent in May to an annual rate of 4.77 million units from an April downward revision to 4.66 million units.  This is 3.6 percent below the 4.95 million units in May 2008.

Historically low mortgage rates and the $8,000 tax credit are helping the housing market.  Inventory is down to a 9.6 month supply from a 10.1 month supply in April.

The average rate for a 30-year fixed mortgage is 4.86 percent which is up slightly from 4.81 percent in April. 

The ICSC-Goldman Store Sales were unchanged in the June 20 week.  The year-on-year rate is down 0.9 percent.  The Redbook reported a year-on-year drop of 4.2 percent for the June 20 week.  Both reports note that warmer weather may result in a pickup in sales.

The Federal Reserve begins their policy meeting today with an announcement tomorrow of any shifts in policy.

Existing home sales will be released at 10:00 a.m.

No major economic reports are due today.  Later this week, the focus will be on the Federal Reserve meeting and any policy changes that may be announced.

Protests in Iran over the elections and tensions with North Korea continued over the weekend.  Oil has fallen to approximately $68 per barrel as optimism wanes and the World Bank has said the global economy will shrink by 2.9 percent this year.

There are no major economic reports due today. 

Yesterday, the Philadelphia Fed's showed improvement for June from the previous month, and the Leading Indicators Index rose 1.2 percent for May.  Jobless claims were in-line with expectations. 

Oil is trading around $72 per barrel after a pipeline was bombed in Nigeria and the World Bank raised its 2009 growth forecast for China. 

Surprisingly, the markets have given very little attention to the rising tensions between North Korea and the rest of the world.  Even with the missile and nuclear testing that has been conducted by North Korea, the markets have largely dismissed the activity.  This morning, CBS News, is reporting that the U.S. Navy is tracking a North Korean cargo ship that may be carrying banned weapons.  It is believe the cargo ship may be preparing to launch a test-missile with the ability to reach Hawaii. 

How these escalating tensions play out remains to be seen.  Will the markets view it as just another ploy by the North to get funds for its troubled economy or will it become something more serious? 

The Mortgage Bankers’ Association Purchase Applications Index fell 3.5 percent in the June 12 week to 261.2.  The refinance index also declined 23 percent to 2,605.7.  The average 30-year fixed rate mortgage shrank slightly by 7 basis points to 5.50 percent.  The rise in rates is dampening demand in the housing market.

The Consumer Price Index for May rose 0.1 percent from the previous month as inflation was held in check.  A 0.2 percent decline in food prices helped offset a 0.2 percent increase in energy.  The core CPI (less food and energy), rose 0.1 percent after an increase of 0.3 percent in April.

FedEx Corp. (FDX) lost $876 million or $2.82 per share for the fourth quarter.  Revenue was down 20% to $7.85 billion, down 20%.  The company warned that fiscal first-quarter earnings may be as much as 76% below last year's levels.

Standard and Poor’s downgraded the credit ratings on 22 banks.  The banks that were downgraded are:

1. Associated Banc Corp.
2. Astoria Financial Corp
3. BB&T Corp.
4. Capital One Financial Corp.
5. Carolina First Bank
6. Citizens Republic Bancorp Inc.
7. Comerica Inc.
8. Fifth Third Bancorp
9. First National Bank of Omaha
10. Huntington Bancshares Inc.
11. KeyCorp
12. M&T Bank Corp.
13. PNC Financial Services Group
14. Regions Financial Corp.
15. Susquehanna Bancshares Inc.
16. Synovus Financial Corp.
17. U.S. Bancorp
18. Valley National Bancorp
19. Webster Financial Corp.
20. Wells Fargo & Co.
21. Whitney Holding Corp.
22. Wilmington Trust Corp.

The ICSC-Goldman Same Stores sales report dropped 0.6 percent for the June 13 week.  The year-on-year decline is 1.5 percent with higher gasoline prices and the weather being cited for the decreases.  Redbook reported a 4.8 percent year-on-year decline for the June 13 week. 

New privately owned housing starts increased in May by 17.2 percent from the previous month to 532,000 units.  Strong gains were made in the West.  Year-on-year the results are 45.2 percent less than they were in May 2008.  New privately owned housing permits were also up 4.0 in May from April to 518,000.  Permits are off 47 percent from May 2008. 

The Producer Price Index rose 0.2 percent in May from April.  Food prices dropped 1.6 percent and energy increased 2.9 percent for the month.  Excluding food and energy, the core PPI fell 0.1 percent.

Industrial Production (which measures the output of the nation’s factories, mines, and utilities) fell by 1.1 percent in May.  Production is lower by 13.4 percent from a year ago.  The capacity utilization rate fell to 68.3 percent from 69.1 percent from the previous month.  Prior to the current recession, the low mark for capacity utilization was 70.9 percent in December 1982.

Overall, retailers will probably experience weaker sales in June.  The housing market has showed some signs of improvement, but the recent increase in mortgage rates may hinder the rebound.  Inflation is being held in check, but factories are still reducing output to meet lower demand.  This may continue for another few months until Chrysler and General Motors emerge from bankruptcy.

The Empire State Manufacturing Survey Index declined in June by -9.4 percent from a drop of -4.55 percent in May.  New orders were still down at -8.15 percent, which was slightly better than the -9.01 contraction the previous month.  Overall, the report shows that we are still in a deep recession, even though we are seeing some small signs of improvement.

Markets are down this morning as the dollar has strengthened and commodities are coming off their recent highs as oil retreats.

Import prices and export prices both increased in May.  Import prices rose 1.3 percent and export prices increased by 0.6 percent.  Both figures also moved upward in the previous month.  Ex-petroleum, the import price index moved up by 0.2 percent which ended several months of decline.  Both reports hint that inflation may be on the rise.  The ten-year Treasury bond is hovering around a 3.75 percent yield. 

The stock markets and bond markets are in a bit of a tug-of-war at the moment.  As reports come out that show signs of the turnaround in the economy, money has moved out of bonds and into the stock markets.  However, governments around the world are issuing massive amounts of debt to finance the rescue plans being offered to banks and businesses.  While the demand for Treasuries has remained firm, too much supply coupled with money moving into stock markets may cause yields on Treasuries to increase.  Why?  Because investors will demand higher yields (and the government will have to offer higher yields to entice buyers) in order to keep money out of the stock markets and moved back into the bond markets. 

The other part of the puzzle is the consumer.  Increasing Treasury yields will cause interest rates to rise on mortgages, auto loans, credit cards, and consumer loans.  This increase in rates may come at an inopportune time as consumers are remaining somewhat cautious and limiting their purchases.  The rate increases can dampen demand for housing and consumer products and thus delay a recovery.

Retail Sales for May were up 0.5 percent from the previous month to $340 billion.  The primary driver for the increase was gasoline sales which were up 3.6 percent.  Excluding motor vehicles and gasoline sales, retail sales were up 0.1 percent from April.  Total sales from the March to May 2009 were down 9.7 percent from the same period a year ago. 

Initial Jobless Claims for the June 6 week were down 24,000 to 601,000.  The previous week was revised upwards by 4,000 to 625,000.  The four-week moving average for initial jobless claims declined 10,500 to 621,750.  Continuing Claims for the May 30 week rose 59,000 to 6.816 million. 

RealtyTrac reported that foreclosure filings in May fell 6% from April, but rose 18% from a year earlier.  Foreclosure filings were reported on nearly 321,500 properties in the month.  May was the third straight month in which filings exceeded 300,000.

The Mortgage Bankers’ Association Purchase Applications Index in the June 5 week showed a slight increase to 270.7 from 267.7 the previous week.  Refinancing fell 12 percent to 2,605.7.  The average rate for a 30-year fixed mortgage rose by 32 basis points to 5.57 percent.

The U.S. trade gap deficit grew in April to $29.2 billion from a revised $28.5 billion the previous month.  Exports fell 2.3 percent and imports declined 1.4 percent.  Overall, we are continuing to see a decrease in demand and manufacturers will not welcome the drop in exports. 

The deficit is calculated by taking exports for the month, $121.1 billion, and subtracting imports, $150.3 billion, with the result being a deficit of $29.2 billion.  Thus, we are taking in more imports than we are exporting.  Exports are now at their lowest levels since July 2006, and imports are at their lowest numbers since September 2004.

Crude oil has increased to over $71 per barrel. 

The ICSC-Goldman store sales were up 0.2 percent for the June 6 week from the previous week.  However, the year-on-year comparison was down 0.8 percent.  This is the lowest reading since early May.  Last year, the tax rebates helped drive sales and this is making for a difficult comparison for the year-on-year figures.

Redbook reported a drop of 4.4 percent for year-on-year sales for the June 6 week.  For the month, the Redbook was off 4.3 percent.  The monthly and year-to-year figures are big moves for a report that usually changes a percent or less.  Wal-Mart was removed from the Redbook report and this may have some factor on the numbers.

The Congressional Oversight Panel is recommending that the stress tests be redone for the 19 banks involved.  The less adverse scenario in the initial stress tests used an unemployment rate of 8.9 percent.  The unemployment rate is now 9.4 percent, and the Panel suggests that more tests are needed in light of the new economic figures.

In contrast, the Treasury announced that 10 banks are eligible to repay their Capital Purchase Program (CPP) loans.  If all 10 institutions repay their loans the Treasury will take in $68 billion.  The Treasury did not name the banks.  This would free the banks on executive pay and hiring matters from government involvement.

The U.S. Supreme Court halted the Chrysler/Fiat deal “pending further order.”  Three Indiana pension funds have argued that the merger has made them junior subordinates to debt held by the UAW union trust.  The deal may ultimately proceed, but this is a bit of a setback for Chrysler.

There are no major economic reports due today.

Late Friday afternoon the consumer credit report was released for April.  Consumer credit was down $15.7 billion for the month.  The overall number was split fairly evenly with revolving credit down $8.6 billion and non-revolving credit down $7.1 billion.  With the savings rate increasing to 5.7 percent and banks tightening available credit to consumers, it could spell trouble for a recovery.  Consumer credit was down by $10.9 billion in February and $16.5 billion in March. 

The question going forward for many businesses is where will growth come from?  Most businesses have cut their work forces and expenses to bare minimums and are anxiously awaiting a pick-up in demand.  With the consumer going into a savings mode and not able to get credit, the slowdown may be extended.  While we have seen some positive signs the past few weeks, the challenge will be to create real long-term demand for products and services.  An uptick in demand may spur businesses to hire again and help establish a stronger recovery for the economy and for households.

Nonfarm payroll employment fell by 345,000 in May.  This was better than the 500,000+ range that most analysts were predicting.  The unemployment rate continued to rise and increased from 8.9 to 9.4 percent, and the number of unemployed persons increased by 787,000 to 14.5 million.  Since December 2007, the number of unemployed persons has increased by 7.0 million and the unemployment rate has grown by 4.5 percent.

Construction lost 59,000 jobs, manufacturing was down 156,000, and professional and business services shed 51,000 jobs.  Education and health services increased by 44,000 and leisure and hospitality gained 3,000.

The number of long-term unemployed (those jobless for 27 weeks or more) increased by 268,000 over the month to 3.9 million and has tripled since December 2007. 

Oil has risen to over $70 per barrel on the payroll data and stock futures are higher.

Initial Jobless Claims fell 4,000 in the May 30 week to 621,000.  The prior week was revised higher by 2,000 to 625,000.  The 4-week moving average was 631,250, an increase of 4,000 from the previous week's revised average of 627,250.  Continuing Claims for the week ending May 23 decreased by 15,000 to 6,735,000 from the previous week’s revised 6,750,000.

Productivity was revised upward for the 1Q2009 to 1.6 percent annualized from the initial estimate of 0.8 percent.  Unit labor costs were revised down to a gain of 3.0 percent for the quarter versus the initial estimate of 3.3 percent.

• Wal-Mart Stores Inc. (WMT) said it will create more than 22,000 jobs in the U.S. this year as it expands stores and opens new ones.
• Intel Corp. (INTC) will acquire Wind River Systems Inc. (WIND) for $11.50 a share in cash, or around $884 million.
• Gap Inc. (GPS) same-store sales for May fell 6 percent and total sales across all stores fell 5 percent.
• Costco (COST) reported that comparable store sales fell 7 percent for May and total sales fell 5 percent to $5.47 billion.

Factory orders improved in April by 0.7 percent from the previous month.  Durable goods were up 1.7 percent for the month.  Inventories were down 1.0 percent as factories adjust to lower demand.

The Institute for Supply Management’s Non-Manufacturing Index barely moved in May showing a small rise of 0.3 percent to 44.0 from the month earlier.  A reading below 50 shows contraction and this is the eighth consecutive month of shrinkage, but at a slightly slower rate.  New orders fell 2.6 percent to 44.4 and employment increased by 2 percent to 39.0.   

The Mortgage Bankers’ Association Purchase Applications Index improved by 4.3 percent in the May 29 week to 267.7.  However, the 30-year average mortgage rate increased by 44 basis points to 5.25 percent.  The refinancing index fell 24 percent for the week to 2,953.6.  The increase in mortgage rates may slowdown any recovery in the housing market, especially if rates continue to increase. 

The Challenger Job Cut reported 111,182 layoffs in May versus the 132,590 in April.  Separately, ADP estimated that private payrolls fell by 532,000 in May. 

Factory Orders for April and the ISM Non-Manufacturing Index for May will be released at 10:00 a.m. today.