Market Talk

Late buying spurt carries US stocks higher, after 1Q GDP is revised to narrower contraction, and GM’s imminent bankruptcy draws closer.

DJIA rises 97 (1.2%) to 8501, finishing the week up about 2.7% and the month up 4.1%; in the past three months, the index has gained about 20%. S&P 500 rises 12 (1.4%) to 919, Nasdaq Comp gains 23 (1.3%) to 1774. Indexes were flat around 3:30 p.m. Big Board volume’s weak.

Big rally in Treasury market wipes out most of the week’s losses, taking 10-year yield down to 3.45% amid hopes of renewed Fed buying. Crude jumps over $66/barrel.

Blogs are buzzing about Microsoft’s (MSFT) new “Bing” search engine, just the way Microsoft likes it.

WSJ says MSFT will spend about $80M to $100M on a major new advertising campaign in print, tv and on the Web for Bing, which is scheduled to launch on June 3.

So far, reviewers say the search engine is definitely an upgrade from Live Search, but it likely won’t be a ”Google killer.”

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May you live in interesting times.

These are – what’s the word? momentous? eventful? fateful? - days for the markets and the economy.

It’s interesting to see equities markets rising in the face of everything arrayed against it. Wall Street’s always been a place where optimism holds major sway. Even the complete break down of Wall Street itself was only a temporary setback.

There are serious portents swirling around the market. The 10-year yield is rising sharply, the dollar is sliding, crude’s surging, even gold is angling back toward $1,000/ounce.

How’s that warning go? May you live in interesting times.

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Premarket US stock futures suggest bulls are inclined to press yesterday’s rally heading into May’s final trading session. Treasurys have firmed notably, but a couple flies still in the ointment, namely oil prices, which continue to move steadily higher, now above the $66/barrel mark, and the US dollar is tumbling. Gold, also, is back around $975.

Second look at 1Q GDP due at 8:30am, economists look for revision to negative 5.5% from initial negative 6.1% print; May Chicago PMI set for 9:45am ET and Reuters/Univ of Michigan final May reading on consumer sentiment out at 9:55am. Should be interesting to see how well it jibes with Conference Board’s confidence measure earlier this week.

S&P futures up 6.30; DJ futures up 51. Ten-year higher, yield at 3.63%.

US stocks continue the week’s erratic trading, rising after yesterday’s selloff and after Monday’s rally, as investors absorb a raft of economic data and GM edges closer to bankruptcy, although it might finally have the bondholders on board.

DJIA jumps 104 (1.3%) to 8404, S&P 500 gains 14 (1.5%) to 907, Nasdaq Comp rises 21 (1.2%) to 1752. Big Board volume’s weak. Again, Treasurys market is the big focus; 10-year yield hits key 3.75% mark, rising as high as 3.76% actually, but later falls to 3.64%.

So, let’s see. Monday the Dow surged ahead about 195 points (confidence looks great!) Yesterday, it slid 173 (government debt looks scary!) Today it rose 104 (well, gosh, some things look good and some things look bad.) What it really looks like is the pros are just playing games here.

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Sobering data from the Mortgage Bankers Association on first-quarter delinquency and foreclosure rates, with both at record highs. If you’re among the crowd looking for numbers that are “less bad” or show pace of economic deterioration slowing, these aren’t for you.

The combined percentage of mortgage holders not current on their mortgage was 12.07% on non-seasonally adjusted basis. The organization notes the rates had been subdued in recent quarters due to various foreclosure moratoria. Seasonally adjusted delinquency rate was 9.12% of all loans outstanding, up 124 bps from 4Q, and 277 bps vs year ago. 

“In looking at these numbers, it is important to focus on what has changed as well (as) what continue to be the key drivers of foreclosures,” MBA economist Jay Brinkmann said. ”What has changed is the shifting of the problem somewhat away from the subprime and option ARM/Alt-A loans to the prime fixed-rate loans.”

He notes foreclosure rate on prime fixed-rate loans “has doubled in the last year, and, for the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures.”

Ouch. Any one remember ”contained”?

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Like we said, the basic problem with the PPIP is it overpays for lousy assets. But that’s not the program’s only problem.

The real problem with the PPIP is banks are holding toxic assets way above market values, Yves Smith writes at naked capitalism.

“The problem is not the salability of said assets, it’s that they don’t like the prices,” she says, which helps explains why the two previous efforts to get toxic assets off of bank balance sheets have failed.

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Newswires’ Ed Welsch writes:

In response to a question during his interview with Bloomberg about whether the rally in world equity markets was “nothing more than the result of central bank and government intervention,” Marc Faber, famous for his Gloom, Boom & Doom report, said:

I think that’s a very good point, that occasionally you can have equity markets moving up very strongly in nominal terms, and they moved up with a disconnection to the real economy.

In other words, the real economy in the world I don’t think will go up to the 2006, 2007 levels of prosperity or heights of industrial production, but the markets could theoretically make new highs if you print enough money…If I throw money at the system, say if, in this room, if I double the supply and the quantity of money, and I create a huge deficit, I can create a mini boom – not a lasting boom, but a mini boom, a crack-up boom, that explodes at some point.

That didn't exactly go according to plan.

Ever since then-Treasury Secretary Hank Paulson came up with the idea of buying impaired assets directly from banks, the plan has met with waves of opposition that have forced its proponents to back off, retool it, and present it under a new light.

But the plan could never get past the fact that its main component involved overpaying banks for depreciated assets. It’s latest incarnation, the Private-Public Investment Partnership, or PPIP, still hasn’t. But now, it seems, it may not matter so much.

The Journal reports today that at least one part of the plan, the FDIC’s program to buy loans, “is stalling and may soon be put on hold.”

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Stocks get a bounce from the durable goods report, which jumped far above expectations, and the weekly jobless claims, which fell more than expected, although the continuing claims number struck another fresh record, its 17th. (For some reason, 17 weeks seems to be weighty enough that the streak is now getting almost as much play as the initial claims number.) 

But the new-home sales report is putting a crimp in the market’s style. Sales “inched” ahead, but rose below expectations. Ironically, the caveat here is that new-home sales are a far smaller component of overall sales than the existing sales, which was reported yesterday. But yesterday, as they say, seems so far away.

DJIA, up as much as 89 earlier, recently up just 10, S&P 500 up 2. Ten-year’s flipped the script, with the price rising and the yield dropping to 3.635%.

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