U.S. Producer Prices rose in July

Daily Market Commentary for August 17, 2011

Labor Department reported U.S. Producer Prices rose 0.2% in July as a decline in energy costs did not immediately filter through the rest of the economy. (read more at Millennium-Traders.Com)
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Dow Jones Industrial Average was hosting a mild loss into early afternoon trading. It appears news from DELL started the southbound trend. Gold settled on the Comex division of the New York Mercantile Exchange at yet another new high, just six dollars away from $1,800 an ounce.

During a fresh round of measures by Switzerland’s central bank to halt the rise of the Swiss franc, the action failed to impress traders, while the Swiss government raised the alarm over the potential damage the currency’s rise could have on the nation’s export-sensitive economy. Following the meeting of Switzerland’s cabinet, they reported that it would provide 2 billion francs ($2.5 billion) in aid to alleviate the pain caused by the strength of the franc.

Press release from Zurich: Swiss National Bank intensifies measures against strong Swiss franc; The measures taken thus far by the Swiss National Bank (SNB) against the strength of the Swiss franc are having an impact. Nevertheless, the Swiss franc remains massively overvalued. The SNB has therefore decided to expand again significantly the supply of liquidity to the Swiss franc money market. In so doing, it is increasing the downward pressure on money market interest rates with a view to further weakening the Swiss franc exchange rate. With immediate effect, it aims to expand banks’ sight deposits at the SNB further, from CHF 120 billion to CHF 200 billion. In order to achieve this new target level as quickly as possible, it will continue to repurchase outstanding SNB Bills and to employ foreign exchange swaps. Furthermore, the SNB reiterates that it will, if necessary, take further measures against the strength of the Swiss franc.

Federal Reserve Bank of Dallas President Richard Fisher voiced his concerns to an audience in Midland, Texas that the current accommodative policy the Fed employs has done little because businesses are too scared of future government policy, particularly after the debt ceiling debate. By keeping the cost of capital unchanged through the next election, there’s no incentive to invest and expand now. “With the leadership of the nation — Republicans and Democrats alike — and every talking head in the media making clear hour after hour, day after day in the run-up to Aug. 2 that a financial disaster was lurking around the corner, it does not take much imagination to envision consumers deciding to forego or delay some discretionary expenditure they had planned,” Fisher said. “Now, put yourself in the shoes of a business operator,” he added. “You have money in your pocket or a banker increasingly willing to give you credit if and when you decide to expand. But you have no idea where the government will be cutting back on spending, what measures will be taken on the taxation front and how all this will affect your cost structure or customer base.” “My longstanding belief is that the Federal Reserve should never enact such asymmetric policies to protect stock market traders and investors,” he said. “Core producer prices are still increasing at a higher than desirable rate,” he said. “But I have suggested to my colleagues that while many companies have begun and will likely continue to raise prices to counter rising costs that derive from a range of factors — including the run-up of commodity prices in 2010 and increases in the costs of production in China — weak demand is beginning to temper the ability of providers of goods and services to significantly raise prices to consumers.”

Dell (NasdaqGS: DELL) reported tepid consumer demand which added to the negative sentiment on the street and shed 10% on share value, into early afternoon trading.

Nokia (NYSE: NOK) and Qualcomm (NasdaqGS: QCOM) are among several technology companies considering bids for InterDigital (NasdaqGS: IDCC) will be postponed from next week to after Labor Day. Shares of IDCC were higher by 7% into early afternoon trading.


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