Trading Fears Mount as Federal Deficit Expected to Top $9 Trillion by 2020

In the stock market the Dow ended yesterday with a 30 point gain, but looks about 18 points lower at the open. Traders are beginning to express concern about our mounting federal deficit. According to the Office of Management and Budget (OMB) the deficit is expected to swell by $9 trillion over the next decade. That’s an incredibly large number to try to recover.

Metals are trading flat to a shade higher over in late morning European action. Silver is unchanged at $14.29. Gold is $3.00 higher and changing hands at $947.00. Palladium is $288.00 having edged up $2.00 since yesterday’s close. Platinum is down $8.00 and trading at $1234.00 per ounce.

Background barometers are flat to lower with Crude Oil quiet at $72.07. Oil ended sharply lower yesterday as technical selling pushed prices down by $2.32 per barrel. Crude is currently up 2 cents with traders looking to see a 2.7 million barrel decline when today’s Weekly Oil Inventories get reported.

Over in the currency markets the Euro is trading a quarter of a U.S cent lower in advance of today’s U.S. economic data. Both of today’s reports are expected to show improvement. July Durable Goods are expected to show a rise of 3.2% compared to June’s decline of 2.5%. That’s a pretty good jump. Durable Goods are the more expensive items we purchase. They tend to have useful lives of 3 or more years (i.e. appliances, furniture, and vehicles). Being expensive; they tend to be more sensitive to consumer confidence and budgetary constraints. New Home Sales for July are also expected to show a slight improvement with the latest estimate sitting at 390,000 versus last month’s 384,000. The numbers continue to be weak, but they are moving in the right direction. Last on the Euro $1.4290.

On the geo-political front Lybia’s leader Muammr Qaddafi plans to visit the U.S. and stay in his diplomatic mansion in New Jersey. New Jersey is home for a number of families which lost loved ones in the Pan Am Lockerbie bombing. Sometimes you have to scratch your head and wonder. I can only imagine what the press will do with this story once Qaddafii shows up. In a final note, political icon Senator Ted Kennedy has passed away at age 77 from brain cancer.

Improvement in Consumer Confidence Expected Today – Bernanke will be Reappointed Fed Chairman

The metals are trading a shade higher in advance of this morning’s economic data, and in the aftermath of news reports that indicate Ben Bernanke will be reappointed to another term as Chairman of the Federal Reserve. It appears President Obama’s advisors decided to heed Wall Street warnings and maintain continuity.

Silver is 2 cents higher at $14.22. Gold is $947.00 up $5.00. Palladium edged up $3.00 to $285.00. Platinum down $2.00 and is presently trading at $1238.00. Our background barometers are mixed and quiet with Crude slipping 17 cents to $74.20. The Euro is 28/100ths of U.S cent higher at $1.4328.

U.S . stocks ended the Monday trading day flat with a marginal gain of 3 Dow points. We still have no clue as to why the market collapsed so rapidly yesterday. This morning the early futures indications are calling for a rise of 17 points. The indication is moot given the fact that the economic data will hit the wires long before the market opens.

As for the data; we expect to see improvement in both reports. The Case Shiller Home Price Index is estimated to clock in with home prices declining 16.4% compared to last month’s decline of 17.06%. Consumer Confidence for August is also expected to show improvement with an index of 47.9 versus July’s 46.6. Consumer Confidence is very important to the economy because it remains the key factor driving consumer spending. Spending drives our economy.

Dollar Currency Traders are Nervous

In the currency markets we find the Euro trading 59/100ths of U.S cent higher at $1.4274. Dollar traders are nervous in advance of today’s U.S economic data.

While the calendar is thin; it contains an important report in the form of Consumer Confidence for July. Economists are calling for a reading of 49; down a shade from June’s 49.3. Consumer Confidence is the overriding driving force behind consumer spending. Spending drives our economy. The slight deterioration is giving traders reason to pause.

Today’s economic calendar also carries the Case Shiller Home Price index for May where the estimate calls for home prices to be down by 17.9% compared to last month’s annualized decline of 18.2%. It’s another case of bad but better.

Metals are trading lower this morning Silver is $13.99 down 4 cents. Gold is $2.00 lower and changing hands at $951.00. Palladium is down 1 dollar at $259.00. Platinum is $1,214.00 down 1 dollar in overnight trading.

Over in the energy sector Crude oil is flat with the last trade at $68.27 off 11 cents. In the equities market stocks as measured by the Dow Jones Industrial Average ended yesterday with a marginal gain of 15 points. This morning the Dow looks 29 points lower.

Asian markets closed a shade lower with Europe in the process of following suit. In world matters Israeli officials warned of a possible strike against Iranian nuclear facilities. The comments were made during Secretary of Defense Gates’s visit to Israel.

On the domestic front it appears that the contentious Health Care Reform Bill will not be voted on before the pending Congressional recess.

Resurgance in the Dollar

The metals eased from the morning opening highs to close only a shade higher in New York trading. Traders were quick to move to the sidelines after both the Euro and Oil gave up their gains. A resurgence in the Dollar came on the coat tails of a stronger than expected New Home Sales report which clocked in at 384,000 units. Not only did we get an 11% jump in the number of new homes sold; prices were also solidly higher. As a result the Euro slipped to the current level of $1.4215 down 15/100ths of a cent versus our Greenback.

Metal traders decided to lighten up on positions. Silver finished the day at $14.03 up 16 cents. Gold closed unchanged at $953.00. Palladium closed with a $2.00 gain at 260.00. Platinum closed at $1215.00. up $25.00.

Trading volume was moderate. Crude Oil took it’s cue from the Dollar as well as some negative technical trading commentaries. Crude is presently up a mere 10 cents at $68.16.

Over in the stock market the Dow has also turned negative over nervousness surrounding this week’s large U.S treasury auction along with only mixed corporate earnings results. Last on the Dow 9069 down 23 points.

With today’s positive home sales report behind us; traders will now focus in on tomorrow’s Case Shiller Home Price Index along with a fresh look at Consumer Confidence. In the morning I’ll have the latest estimates along with any overnight global developments.