Five Stock Market Changers to Watch This Week

Featured Story: Flash Crash Still a Mystery to Regulators

Consumer pulse: Retail sales figures come out Tuesday pre-market (8:30 a.m.) and the closely watched Michigan Consumer Sentiment Index is released Friday morning (9:55 a.m.). A declining consumer sentiment figure is considered an early signal of a coming downturn in the economy.
Inflation/deflation watch: How much we might be paying for things in the future is reflected in the Producer Price Index (Thursday 8:30 a.m.), a measure of consumer goods and capital equipment early in the production process. How much we just paid shows up in the Consumer Price Index (Friday 8:30 a.m.). Watch the food inflation breakout, say the experts, for its effect on commodity prices, including gold and other metals.
Factory output: Industrial production (9:15 a.m. Wednesday) got a bit of a pop recently on longer hours at the nation’s auto factories. As the U.S. jobless rates grind higher, it might be up to exporters to keep American factories humming, an open question if the dollar holds its ground against cheaper foreign currencies.
Debt questions: On Thursday (9 a.m.), Treasury will release capital flows (TIC) data, including data on foreign holders of U.S. Treasuries. China has stepped up purchase of other countries’ debt. Will Uncle Sam stay on the Beijing’s “buy” list?
Major earnings: Best Buy, Cracker Barrel, Kroger, Pall Corp. (Tuesday), Zale, Clarcor, Dress Barn (Wednesday), Discover Financial, FedEx, Pier 1 Imports, Herman Miller, Oracle, Research in Motion (Thursday).

Next Week: Federal Reserve meets on Tuesday, Sept. 21 with news on interest rates by 2:15 p.m.

Flash Crash Still a Mystery to Regulators

Regulators probing the stock market "flash crash" last May still have not uncovered a single cause but will point to "stub quotes" and other previously identified issues as having exacerbated the market's dramatic drop, according to two sources familiar with the probe.

A third source said the U.S. Securities and Exchange Commission is still asking about a "smoking gun" that might explain the May 6 crash, when the Dow Jones industrial average plunged some 700 points before sharply recovering, all in about 20 minutes.

The Devaluation of the Dollar Is a Done Deal

When the market crashed more than 18 months ago, the dollar strengthened significantly. Investors worldwide fled to the greenback. Hundreds of billions of poured into the United States.

But all that ended quickly when Barack Obama took office.

Once Obama and congressional Democrats began handing out trillions of dollars in bailouts and posting record deficits, the confidence of world investors was badly shaken. The value of the U.S. dollar began plunging.

Since taking office, the Obama administration has increased the monetary base by a staggering $10 trillion. In less than a year, it managed to DOUBLE the expected annual budget deficit to almost $2 trillion.

The result was predictable: The stock market rallied . . . but the once mighty dollar has PLUNGED against foreign currencies. Now inflation is about to wipe out the stock market gains of recent months.

Click here to find out how you can protect yourself from Obama’s plan that could result in your wealth being wiped out your wealth.

"Quote stuffing," in which large numbers of rapid-fire stock orders are placed and canceled almost immediately, will not be fingered as one of the causes of the crash, sources have said.

But the SEC is increasingly probing market data from other trading days, looking for possible problems with what are sometimes excessive numbers of buy and sell orders, said the third source. The worry is that such a flood of orders could clog data feeds and confuse investors, giving the sender an unfair advantage to arbitrage between marketplaces.

Quote stuffing, a new term describing this possibly illegal trading practice, differs from stub quotes, which are orders placed well off the market prices for stocks.

Regulators are soon due to issue a follow-up report on the crash, which rattled investors worldwide and exposed flaws in the high-speed electronic marketplace.

So far, the report by market regulators does not contain a lot of new information and is expected to repeat earlier findings that a numbernumber of events caused the crash, two sources said. The sources requested anonymity because regulators are still collecting data and finalizing the report.

The sources said the report will point to stub quotes as one of the structural issues that contributed to the plunge.

The SEC has already adopted a pilot program to help prevent a repeat of the crash. That circuit-breaker program pauses trading in a single stock when that stock is in crisis, and has tripped several times since it started in June.

The SEC also wants to ban stub quotes and is expected to propose such a rule in the near future.

For months, the SEC and other market regulators have grappled with half a dozen working hypotheses to explain the flash crash. They have probed links between declines in prices of stock index products and the severe mismatch in liquidity, among other things.

Although regulators still cannot explain what went wrong, they are considering new rules to solve problems exposed by the flash crash.

In addition to the single-stock circuit breakers and stub quote ban, the SEC wants to tighten rules for marketmakers to ensure liquidity during stressful times.

The SEC is also mulling updates to its broader circuit breakers to give markets a brief reprieve should they plunge uncontrollably. Current marketwide circuit breakers were not triggered during the May crash.