Market Talk

What did we say this morning? That little itch should be telling you something.

Stocks get clipped as equities investors watch the carnage over in the bond market, where the 10-year yield rocketed above 3.70% (we saw it as high as 3.717%), and as GM steers itself toward bankruptcy.

DJIA drops 173 (2.1%) to 8300 (actually 8300.02,) S&P 500 loses 17 (1.9%) to 893 (itself a key support level,) Nasdaq Comp slides 19 (1.1%) to 1731. Big Board volume’s light; comes in around 5.4B shares in composite volume; average volume this year is around 6.3B.

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(Editor’s note: this was originally posted without acknowledging that it was written by Newswires’ Ed Welsch. Our apologies to the author.)

This is still a bear market rally, says former Merrill economist David Rosenberg, who’s now chief economist and strategist at Gluskin Sheff up in Toronto.

Rosenberg sees similarities between today and late 2001, early 2002, when the recession ended but the recovery was aborted until the second half of 2003. “Asset deflation and credit contraction cycles never play out according to the historical script, which is one reason why we remain cautious and not at all trusting over the durability of this market bounce of the last two months,” he writes.

A retesting phase is coming, he says, though he’s no longer sure it’ll take the market back to the March lows.

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I see a recovery coming in your second half.

A survey of business economists shows the recession will “probably” end in 3Q, but considering how many other predictions have been smashed upon the rocks of reality, it would be prudent to take the advice with a grain of salt.

The US economy will begin to expand next quarter, according to 74% of economists in a National Association for Business Economics survey. But Bloomberg points out growth will be slower and unemployment will be higher in this year’s second half through 2010, compared to NABE’s February poll.

 ”Of course, these are the same folks who said there would not be a recession,” FusionIQ CEO Barry Ritholtz writes on his blog. “Given their track record and ill informed opinions, we can safely ignore the noise that passes for their analysis.”

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Meet Detroit's saviors.

The hottest action in Detroit these days is in a bankruptcy courtroom.

As Chrysler appears ready to emerge quickly from its stay under bankruptcy court protection, General Motors (GM) is getting ready to file for bankruptcy court protection, as the government and the unions prepare to take ownership of both companies.

It’s like the Marx Brothers are running Detroit. And Washington for that matter.

Even as GM was working out a deal with its unions that would allow the government to take a 70% stake in the company (did we really just write that? Good grief,) GM’s bondholders rejected a debt-swap offer that would have given them a piddling 10% of the company. Without that offer, and probably even with it, GM will undoubtedly file for bankruptcy court protection, if not before the government-imposed deadline of June 1 to come up with a viable restructuring plan, then soon after.

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We’re still talking about yesterday’s rally, even as today’s trading gets underways, because it’s still a puzzler. The Conference Board’s consumer confidence report is not exactly a first-tier economic indicator, but yesterday it was treated like one.

That’s an indication that yesterday’s action had more to do with market internals, technical levels and professional traders jockeying than it did with anything fundamental about the economy. In fact, the more fundamentally important data point of the day – the Case-Shiller home price index – was all but ignored by the equities market.

“There was an odd nature to the action,” UBS’ Art Cashin, who runs the firm’s floor operations at the NYSE, says of yesterday’s action:

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Mr. Market needs a rest after yesterday.

US stock futures essentially flat after yesterday rally, which seemed suspect to us. The timing of yesterday’s consumer confidence report could not have been better, and was just the shot in the arm bulls needed.

Consumer confidence or sentiment readings are typically a blip on the daily trading radar, but these are special times, of course. Jubilant reaction is understandable, but a couple of odd things in the report are a little baffling.

S&P futures down 1; DJ futures down 9. Treasurys still punished, 10-year yield up to 3.53%.

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