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US stock market daily report (September 14, 2012, Friday)

Contributed by Millennium Traders

The Securities and Exchange Commission initiated first time ever financial penalty against the New York Stock Exchange (NYX) over alleged compliance failures that gave certain customers an improper head start on trading information. The exchange allegedly violated a rule over an extended period of time beginning in 2008 by sending data through two of its proprietary feeds before sending data to the consolidated feeds according to the SEC order against the NYSE. To settle the case, the NYSE agreed to pay a $5 million fine.

On Friday, a top bank regulator said agency officials are working to release a final version of the so-called Volcker rule, by year-end, that would prohibit big banks from trading stocks and derivatives with their own money and significantly limit banks' investments in hedge funds and private-equity funds. "The regulators are working on it and I think that is the intention," said Federal Deposit Insurance Corporation acting chairman Martin Gruenberg. The FDIC and four other regulators are working to complete the effort after regulators introduced a 300-page proposal in October 2011.

Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corporation on Friday argued that hikes in lending by financial institutions, not reducing loan-loss reserves, is a necessary condition for growing the economy. Gruenberg told an American Banker conference that the improvements seen by the banking sector earnings of the last two years have been largely driven by reducing provisions for loan-losses as credit quality has improved. "At some point, future earnings gains will have to be based to a greater extent on increased lending, consistent with sound underwriting," Gruenberg said. "We know that a return to greater lending is a necessary condition for a growing economy."

The Labor Department reported Friday that U.S. consumer prices increased by 0.6% in August, as gasoline prices rose by the largest amount in more than three years. In July, gas prices surged 9%, accounting for nearly four-fifths of the increase in consumer inflation while food prices rose 0.2%. The so-called core price index rose 0.1% after stripping out volatile food and energy costs. Over the past 12 months within the Federal Reserve's target for inflation, consumer prices have climbed 1.7% and 1.9% on a core basis. The spike in consumer prices, combined with no change in wage growth, resulted in average hourly earnings for U.S. workers to fall 0.7% in the month.

The Commerce Department reported Friday that U.S. retail sales rose a seasonally adjusted 0.9% in August as spending rose sharply on autos and gasoline. Excluding autos, retail sales climbed 0.8% with the boost in sales largely driven by higher gasoline prices as consumers had to pay more at the pump. Gas stations reported a 5.5% increase in sales market the biggest gain since November 2009. Auto sales rose 1.3% in August while purchases at bars and restaurants increased by 0.5%. Electronics, appliances, clothes and general merchandise sales fell. For July, the increase in retail sales was revised down to 0.6% from an initial reading of 0.8%. In the past 12 months, retail sales in the U.S. have risen 4.7%.

The Federal Reserve reported Friday that industrial production slumped 1.2% in August, striking the largest one-month percentage drop since March 2009. The Fed said Hurricane Isaac's impact on Gulf Coast region output was responsible for 0.3 percentage points of the drop. July's growth was revised down to 0.5% growth from a previously estimated 0.6% rise. Compared to August 2011, industrial production is up 2.8%. Capacity utilization fell to 78.2% from 79.2% in July.

The University of Michigan-Thomson Reuters consumer-sentiment gauge released Friday showed consumer sentiment climbed in September to 79.2, the highest level seen since May 2012. The preliminary September reading is up from a final August reading of 74.3. The sentiment gauge, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the most recent recession.