Thursday, August 17, 2006

Market Sentiment

For the past 2 days stock market rose.

On Tuesday, the Producer Price Index (PPI) showed that prices at the wholesale level only edged up 0.1% in July 2006, well below the 0.5% jump in June.

On Wednesday, The Labour Department announced that the Consumer Price Index (CPI) rose by 0.4% in July 2006. But the industrial output in July 2006 slipped to just 4%, half the June pace, an indication that the economy is slowing.

With the data showing a decline in inflation pressures and slowing of economy (also because of the cooling housing market), investors felt that the Federal Reserve might pause further interest rates hike, which would otherwise threaten economic growth and hinder corporate profits.

The Dow Jones Industrial Average was pushed to its highest level in three months on Wednesday.

Investors who bought Abercrombie & Fitch Co. (ANF) calls would be delighted as the share gapped up $5 after earnings announcement and rose another $2 intra-day. ANF's revenue rose 15.2% yr/yr. The company also issued upside guidance for FY07. ANF average trading volume is about 2.2M shares.