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MLR - Premarket Pulse August 17, 2012

Stocks delivered their best performance in almost three weeks as the market's choppy action throughout the summer has tightened up over the past eight sessions as "flat has become the new down." The S&P 500 Index has not closed down more than two points since August 2nd, and according to one sources the rally has been met with "boredom, skepticism, and scorn." Most investors view the rally as more and more of a "pain trade" as the rising indexes force money to come into the market, and in fact NYSE short interest has risen to a five-year high of 19.5. Nevertheless, volume rose on the major exchanges with the Nasdaq's 1% price gain its best performance in the past 14 sessions, and the lack of believers may actually be constructive for the market from a sentiment point-of-view.

In economic news, Chinese premier Wen said subsiding inflation pressures leave the government room for further monetary easing. Also, first-time claims for state unemployment benefits rose in the latest week, the Labor Department reported Thursday. The number of initial claims in the week ending Aug. 11 rose 2,000 to 366,000, ahead of the 365,000 consensus. Because claims have been at the low end of the recent range, the four-week average fell 5,500 to 363,750 which is the lowest level since the week ended March 31.

On the weaker side, the Philadelphia Fed's manufacturing index stayed in negative territory in August, coming in at -7.1 vs. -12.9 in July, marking the fourth consecutive negative reading. Consensus was for a -5.0 reading. Weak U.S. economic data yesterday, however, did not prevent the markets from moving higher as several leading stocks continued to build on prior gains.

Housing and housing-related stocks have continued to act well, with Pulte Home (PHM), Lennar Corp. (LEN), Toll Brothers (TOL), and DR Horton (DHI) all moving to or approaching two years highs. Home Depot (HD) has also streaked to a nearly 12-year high, confirming strength in the sector.

Shares of Wal-Mart (WMT) , the world’s largest retailer, closed down more than 3% in Thursday's trade after the company said it could fall slightly short of Wall Street estimates for the third quarter. The company said second-quarter profit rose by 5.7% and upped its forecast for fiscal-year 2012 earnings.

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