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Second Again... Chicago Loses Out By: Charles Payne

|Includes: ProShares UltraShort S&P 500 ETF (SDS)

The resolve in this market is hard to explain. Just imagine if the jobs report came in better than expected, it's safe to say that the Dow Jones Industrial Average could be up 300-points. Instead, the report was a disaster visa-vie expectations, then factory orders missed consensus by a mile, and then America was dissed (again) by not winning the Olympics. (In an interview, Senator Roland Burris blamed the loss on the fact that the world is still angry with our last President. I thought that the world loved our new President. If this is a rebuke from a world that needs American ingenuity, compassion, and money it's a slap in the face no matter whom the president is. Maybe it will take North Korea and Iran launching nuclear missiles before there is even a dollop of respect. In the meantime, that old blame it on Bush song has gotten worn out and tired.)

The Olympic committee is nothing more than a bunch of elite Europeans; there isn't even a black or brown person in the mix so for them to suggest America is a bad country is beyond understanding. Of course Rio was due as no country in Latin America has ever hosted the games before.

My gut tells me that the rally started too soon, but then again nothing in my gut felt the market wouldn't be down a couple hundred points by now. There is still time in the session and stocks could selloff today, but the message to me is if there is good news (read: good corporate earnings) then this report could be dismissed as the month goes on. One thing I will say is that it's astonishing to me that investors don't expect stocks to go down from time to time. The key to success in the market isn't riding one wave up and then panicking on a wave lower but instead to be able to ride out occasional bumps in the road and take advantage of corrections.

Economic Data

Factory Orders

Another piece of disappointing economic data, factory orders, was reported after the opening bell. Orders for equipment that helps to expand production declined 0.8% (consensus: -0.5%).

September Auto Sales Have a Muted Hangover Effect
By: David Silver, Auto Analyst

During August we had the "cash for clunkers" program, and many expected (yours truly included) to see a difficult month for the auto industry for September. What I didn't expect was all the company-driven incentive programs (not dealership) that were instituted during the month. General Motors has its new 60-day money back guarantee and Hyundai has its own little cash for clunkers program running. Ford (NYSE:F) posted a stronger than expected result while General Motors and Chrysler were again weak, with sales dropping 45% and 42%, respectively. It's interesting to note that General Motors and Chrysler would have done better if the companies had more vehicles on their lots as inventory shortages hampered sales; a grave difference from a few months ago when both companies had months of inventory on dealers' lots nationwide.

The industry's seasonally adjusted annual rate of sales (SAAR) was 9.2 million vehicles, which is roughly equal to that of June when two automakers were in bankruptcy (General Motors and Chrysler). There have been some rumblings following this figure that maybe the cash for clunkers program didn't steal sales away from the future months, as many had expected. We think there was a strong pull forward effect from the cash for clunkers program and even from all the incentives that the automakers offered during the month. For the first time in three-months, incentives offered increased., an automotive Web site, estimated that the average U.S. incentive was $2,557 per vehicle sold, up 3.0% from August 2009 but down 12.0% from September 2008. Refer to our website at for the full article.

Semiconductor Sales Rise for the 6th Consecutive Month
By: Carlos Guillen, Research Analyst

As we reach the end of the calendar third quarter, we continue to see signs that the macroeconomic backdrop is better than many expected. In particular, when we look at business activity in the semiconductor industry, we see that revenues have continued to trend higher since March, and Wall Street analysts as a whole have continued to increase their revenue expectations for the semiconductor companies they follow. What is even more encouraging is that, apparently, the improving global semiconductor revenue is now beginning to be driven by end demand, not just restocking of inventories.

Most recently Research firm iSuppli estimated that third quarter global chip sales grew sequentially by 11.0% but fell 16.0% on a year over year basis. According to the firm, the revenue growth during the quarter was heavily assisted by inventory replenishment. Sales to the largest application market for chips, the consumer-electronics industry, jumped 28.0% sequentially in the quarter. The much-smaller automotive market saw a 30.0% surge, helped by the cash for clunkers program in the U.S. and stimulus measures in China.

Earlier this morning, the Semiconductor Industry Association said global chip sales rose 5.0% in August compared to sales in July, representing the sixth straight month of sequential gains, as the year over year rate of decline, now at 16.0%, continued to abate.

The continuing growth in semiconductor revenues appears to be fueled by demand for PCs and energy efficient products ranging from home appliances to efficient automobile electronics. Demand for PCs has been supported by growing sales of net-books and by significantly cheaper computers that provide much more processing power and memory than ever before.

It is becoming apparent that, although the macroeconomic backdrop is not favorable, it's doing so at a decreasing rate that is shrinking faster than previously anticipated. As a result, many OEMs and distributors have continued to replenish significantly depleted inventories in anticipation of better than expected end demand. However, many companies are already seeing improvements in end-demand, so it is not just inventory restocking that is driving semiconductor company revenues. The fact that manufacturers and distributors have been very careful in managing inventories provides support for the notion that end-demand is indeed contributing to the rise in revenues.

Parting Note

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Written by Charles Payne, CEO and Principal Analyst of Wall Street Strategies ( providing independent stock market research to over 30,000 subscribers, in more than 60 countries. Mr. Payne is a regular contributor to the Fox Business and Fox News Networks. For more information about Mr. Payne, please refer to the company’s website