Market Talk

Don't cry, bears, you'll get another shot next week.

Late surge helps US stocks finish higher, as the government finally nails down the day it’ll release its stress test results (May 7), the auto makers report another poor month of sales and Chrysler’s creditors start staking out positions.

DJIA rises 44 (0.5%) to 8212, up 1.7% on the week. S&P 500 gains 5 to 878, which means the index is sitting just below a key resistance point. Nasdaq Comp adds 2 to 1719.

ISM April report comes in slightly better than March, still in negative territory. But factory orders fell more than expected.

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Sober comments coming from a big bank – in this case JPMorgan – about its peers.

Bank losses will continue to worsen, led by rising unemployment and continued sharp declines in home prices, JPMorgan says, as it cuts 2009 and 2010 EPS estimates for Bank of America (BAC), Citi (C), SunTrust (STI), Fifth Third (FITB), US Bancorp (USB) and Wells Fargo (WFC).

Firm says that while some banks had noted improvement in delinquency trends, they likely benefited from seasonal factors rather than fundamental improvement. Continue reading…

Nothing left to do but smile, smile, smile.

US stocks edged higher as investors keep banking on hopes that the economy’s turned a corner.

Investors may also be ignoring the classic “sell in May and go away” strategy, one of the market’s most cherished clichés. Since 1900, the median gain of the DJIA from May to October is 2.89%, with the median gain from November to April at 4.12%, according to Bespoke Investment Group.

“Sure, the winter is better, but by selling in May, you’re giving up gains,” Bespoke says. And, over the last 20, 50 and 100 years, May to October has been positive more often than negative.

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Since the economy first started cratering, way back in 2007, every tick up in the stock market has been greeted with proclamations from the sunshine crowd that the worst is over, that the bottom’s been hit, that recovery’s begun.

After the past two months, when every beaten-down, hard-luck stock has made amazing strides, the bulls are in full gallop. It’s almost enough to make even the biggest doubters doubt themselves.

But the problem for the bulls is, simply, this: the economy still stinks. There has been an improvement in the rate of decline, but there has been no reversal of that decline. More importantly for stocks, no catalyst has emerged to fuel the next bull market. And yet, every data point that comes in marginally less bad is treated as if Noah spotted land.

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May we suggest, with all due respect, that the so-called stress tests of the nations banks, administered by the federal government, are, to put it bluntly, a complete boondoggle. Unless the goal was to utterly confuse the public, wrack investors’ nerves, further Uncle Sam’s reputation for being unable to competently unscrew a bottle cap and buy the banks two months to further avoid solving their own problems.

In that case, the whole exercise was a smashing success.

“The financial crisis has gone enough rounds to have evolved from tragedy into farce,” Yves Smith writes at naked capitalism. “The stress tests are a prime example.”

The problem for the regulators – and the banks understand this already – is that no matter how they try to soft pedal the results, no matter what language they use to couch them, the public will perceive, and perceive correctly, that some banks have failed the test. Because in any real test, failure is a possible outcome.

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April was a great month for US stocks, though it’s interesting to note the names that did best in the DJIA are also ones that had been hit hardest, and seem to still have plenty of exposure to the recession and/or financial crisis — AmEx, BofA, Caterpillar, GE and DuPont.

Stocks that did worst were previously safe-haven plays, names that appear more insulated from recession — Merck, Wal-Mart, McDonald’s, Exxon and Coke. Wonder what that says about the rally, and if that dynamic will continue.

US stock futures shaded higher, but not quite enough to suggest any early direction for markets. April ISM at 10:00am. S&P’s up 3.40; DJ futures up 23. Ten-year higher, yield at 3.11%.