U.S. MARKET AVERAGES

Early trading in the market was dominated by fall in oil and gas prices, rise of dollar in European trading and Japan’s index reaching a new four-year high. Government released data on personal income and spending. Personal income fell more than expected but spending fell less than the forecast.

At mid-morning Micron Technology led a strong rally in semiconductors stocks. Investors were looking for a loss and Micron delivered seven cents profit for the quarter. This unexpected profit was driven by a strong demand for flash memory needed for storage in digital cameras, cell phones, and storage capacity for other devices. Micron (MU: chart) stock closed up 9% and SanDisk stock (SNDK: chart) in sympathy rallied 6.55%.

Energy and financial sectors remained under pressure during the session. Fall in oil and gas led a steep sell-off in oil and gas exploration company stocks. Financial stocks sold as ten year yield rose to 4.33% on inflation and budget deficit concerns.

MOVERS AND SHAKERS

Dow unit Boeing Co. (BA: chart) added 1%, after the company's machinists union accepted a new three-year contract yesterday and ended a strike. The company renews its jetliner production after less than a month of pending. About 80% of members who voted approved the contract.

Another Dow unit Wal-Mart Stores (WMT: chart) was down 0.4%. The retailer entered Japan in 2002 by investing in supermarket operator Seiyu Ltd. and expects to raise its interest in Japanese company in December from 42.4% to over 50% to turn it into a full subsidiary. To raise its interest, Wal-Mart will buy new ordinary and preferred Seiyu shares.

Deutsche Bank downgraded Kimberly-Clark Corp. (KMB: chart) to hold from buy. The broker pointed as a reason that rearranging the health product company to drive asset rationalization and support higher R&D is the right way but the fast growing raw material costs, a still suffering business in Europe and the loss of synthetic fuel tax benefits are too exhausting to calm down until restructuring savings begin.

ECONOMIC NEWS

The Department of Commerce released its closely watched report on personal income and spending in the month of August. The report showed that personal income fell unexpectedly while personal spending fell more than economists had expected.

The report said that personal income fell by 0.1 percent in August after trending higher in recent months. The decrease came as a surprise to economists, who had expected personal income to increase by 0.3 percent, matching the increase seen in July.

The Commerce Dept. noted that the decrease in personal income was partly due to the effects of Hurricane Katrina. The decrease reflected $100 billion in uninsured losses of residential and business property that resulted from the storm.

The report also showed that personal spending fell by 0.5 percent in August after rising 1.2 percent in July and 1.0 percent in June. Economists had been expecting a more modest decline of about 0.2 percent.

The decrease in consumer spending would have been even more significant if not for the notable increase in gasoline prices that was seen during the month. Excluding inflation, consumer spending fell by 1.0 percent in August after rising 0.9 percent in July.

The Commerce Dept. said that consumer prices rose 0.5 percent in August while core prices, which exclude food and energy prices, rose 0.2 percent.

The report also showed that the notable decrease in spending contributed to some improvement in the personal savings rate, which rose to a negative 0.7 percent in August from a negative 1.1 percent in July. A negative reading still indicates that consumers are dipping into their savings.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed. The Nikkei topped a new four-year high of 13678.44 points on upbeat reports on domestic economy, but later retreated to 0.3% in the red, dragged down by Honda Motor, Toyota Motor, and Credit Saison. Across the region, South Korea’s Kospi lost 0.8%, despite positive government data, Australia’s All Ordinaries fell 0.5% on mining stocks. Stock markets in Hong Kong were closed.

European markets closed in the positive territory on the back of strong tech sector and merger and acquisition talk. The German DAX 30 rose 0.5%, the French CAC 40 gained 0.5%, while London’s FTSE 100 finished flat.

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