That's how you start a new month, with a bang. You have to love it even if you think it was a mirage or cruel joke. On one hand, however, the session was par for the course of late. The market is locked into a trading range that seems to find a reason to bounce at certain levels and a reason to rally at others. In July, the market was on the cusp of breaking through this range. But, lackluster volume and a series of flaccid economic data in August nipped that in the bud. The market tumbled into September, on the cusp of breaking several key support points, but found a reason to not only hold but rejoice yesterday. It's always good to be reminded that the stock market can move higher. It's always good to be reminded that the economy can flex some muscle from time to time.

There is a ton of money on the sidelines, and while it has been there for what feels like forever, at some point that money will seek something better than 0.99% returns. In order for this to happen, there has to be a glimmer of hope in tomorrow's jobs data. Yes, that means celebrating mediocrity at best. We know we have to crawl before we walk, and walk before we run, and there is no doubt the economy is a long way from running. However, we can cut off permanent paralysis. After all the gyrations this spring and summer the market is poised to make a sustained move.

Major long term shifts in market direction haven't been sparked by big up days in the past few years so many professionals simply yawned after the 3% rebound yesterday. Call me more of an optimist. Built into the market has been Armageddon, a double dip recession, a shift to socialism and complete dismantling of the nation. If we can avoid those things the market could make a massive rebound.

Low Taxes

After looking at several sites in several locations, Whirlpool (WHR) has decided to expand a plant in Cleveland, Tennessee and will spend $300.0 million retrofitting an older plant there. This is good news on manufacturing but also points out companies will go where taxes are less onerous. Cleveland, Ohio ranks 47 best on overall taxes and 37 on business taxes while Cleveland, Tennessee (home to 12 Fortune 500 manufacturers) ranks 15 and 11 respectively.

August Auto Sales Bake In Late Summer Heat
By: David Silver, Research Analyst

Going into August's auto sales results, we knew there would be a decline from last year as August 2009 was benefited from the cash for clunkers program. With that in mind, it wasn't as bad as some articles were predicting. One of the headlines include "the worst month for auto sales in 28 years." First thing is it was a stat for the month of August, not any month of the year. That fine print took many by surprise. If you remember back to May, June, and July of last year, the industry seasonally adjusted annual rate of sales (SAAR) was below 10.0 million units, the lowest was 9.2 million. The figure for August 2010 didn't really approach that Armageddon level, but it was one of the worst August's (adjusting for population growth) since World War II. I honestly had hoped we had passed the post WWII comparisons, but apparently not. There were 997,468 sales which equates to approximately an industry SAAR of 11.7 million units.

The two biggest winners from the cash for clunkers program, Toyota (TM) and Honda (HMC), were the biggest losers during the month of August, falling 34.1% and 32.7% respectively. A Company that saw next to no cash for clunkers sales, Chrysler, saw the biggest jump during the month, gaining 6.9% compared to August of 2009. In fact, Chrysler sales are up 10.2% year to date, however, there is a large caveat with Chrysler; it is being compared to a relatively low base. The Fiat 500 will hopefully give the Chrysler name a presence in the small car arena; however, it is entering into a crowded marketplace. I was interviewed on Fox Business on Wednesday afternoon and spoke with a Chrysler dealership owner. He was excited about the future, and to be honest, I was EXTREMELY shocked by Chrysler's results.

General Motors performed a little worse than we had expected. The Chevy brand, which benefits from the cash for clunkers program was down year over year, however, the Company bragged that Cadillac is the fastest growing luxury brand in the industry. Again, take that with a grain of salt as the brand was rebounding from a small base in one of the worst recessions in more than 70 years.

Refer to our website at www.wstreet.com for the remainder of the article.

Discount Fueled Comp Beats
By: Brian Sozzi, Equity Research Analyst

Thus far, investors are awakening to a handful of uncharacteristically robust monthly same-store sales results for early back to school. What gives? By most accounts, sales for back to school commenced on a sour note in August, with very modest acceleration into the latter stages of the month. This was a notion supported by commentary by retail management teams on their 2Q10 earnings calls, as well as within initial 3Q10 guidance ranges. In our view, the commencement of sales tax free holidays, the amplified level of discounting on early fall merchandise, and warm weather that led many back to the stores to purchase seasonal wares (retailers doing much better job of localizing inventory) aided in the partial reconciliation of the industry's pre-holiday inventory conundrum. The dip in the savings rate to less than 6% in August suggested that consumers spent somewhere, and that somewhere appears to have been the malls and discount chains once household bills were satisfied.

Let's not get ahead of ourselves, however. Yes, while it's a positive that comp beats evidenced this morning imply that excess inventory is being whittled down, therefore alleviating one pre-holiday concern, and that there haven't been any 3Q10 earnings warnings, there are important takeaways that investors need to acknowledge. They include:

1. Average transaction value is still in the doldrums, in many cases sharply lower. No discounts, the consumer is willing to sit the dance out. Depressed average transaction value exaggerates the negative margin impact from higher supply chain costs. On the surface, very minimal pricing power in the retail sector.
2. Storm activity could negatively impact September sales.

We are still cycling easy year ago sales comparisons (think mid-single digit percentage negative), so how good are the demand trends across the country. The true test of the retail recovery will come in 2H10.

Economic Data

Initial Claims

It is very interesting to see the headlines following the initial jobless claims release this morning. An Associated Press article, titled "Unemployment claims drop for second straight week," seems a bit misleading if you ask me. Yes claims did fall, but it took until the third paragraph to note that initial claims are still WAY too high for what is considered a healthy economy. We don't have that 5 handle anymore (500K), but at 472K, we aren't that far removed. New claims for unemployment aid fell last week by 6,000 to a seasonally adjusted 472,000, the Labor Department said this morning while economists were expecting a decline to 470K. The four-week average of claims, a less-volatile measure, fell by 2,500 to 485,500, its first decrease after four straight increases. More than 472,000 Americans filed first time claims last week alone. That is a shocking number and very sad considering we had supposedly left the recession months ago.

Business Productivity

The BLS' measure of business productivity for the second quarter was revised downward this morning, showing a decline of 1.8% versus a decline of 0.9% previously. The result was generally in line with expectations. The estimates for the amount of hours worked and cost per hour were mostly unchanged from the initial estimates, with hours showing a 3.5% increase from the first quarter. However, output was revised down to 1.6% from 2.6%.