Market Talk

US stocks erratic amid options expirations, so-called quadruple witching, but equities still fall for the week, and it’s just the third losing week since the March lows were hit and the rally began.

DJIA drops 16 to 8540, rising early and falling late; for the week, the index lost roughly 3%. S&P 500 gains 3 to 921, Nasdaq Comp gains 20 (1.1%) to 1827. Big Board volume’s low (again.)

Tech, financials rise, energy drops, as crude falls below $70/barrel. Still, since rising sharply in a furious rally off those March lows, the DJIA is about where it was in early May. On May 6, it closed at 8512, meaning over the ensuing six some-odd weeks, the index has gained of a whopping 28 points, or 0.3%. Or, if you want to choose a different date, on May 8, the index closed at 8575, meaning in the last month and a half, the index has lost 0.4%.

Climb aboard America, "World Consumers" to the rescue!

The folks at Pimco call it the “new normal,” so get used to it. Strategist Jim Paulsen at Wells Capital Management isn’t having it.

“It” is the prevailing sense out there that once the US economy does return to growth, the trend will be anemic, perhaps for years,  thanks to high unemployment, a chastised and more highly regulated financial system and a feverishly deleveraging, debt-averse consumer. 

But Paulsen believes ”the U.S. economy is not headed for a prolonged period of subpar growth but is rather headed for a significant change in the ‘composition’ of its growth.” The crippled domestic consumer’s contribution to growth ”will likely be offset by a newfound contribution from emerging world consumers,” leaving overall U.S. growth on par with historic norms, he says. Continue reading…

Newswires’ Ed Welsch reports:

FDIC Chair Sheila Bair wasn’t exactly “on message” when she got on CNBC this morning and said ending the “Too Big To Fail” syndrome is the most important aspect of the Obama administration’s coming reform of the financial regulatory system.

Bair said there needs to be a process “that allows them to fail and does impose market discipline on those market participants who may have invested without doing due diligence they should have done.”

But how do Bair’s comments square with this statement: “In the midst of a deep recession and financial crisis, the collapse of these companies would have been devastating for countless Americans, and done enormous damage to our economy.” That was President Obama earlier this month on the government’s decision to intervene in the fate of GM.

It would seem President Obama and Bair are of two different minds. And the interventionist mindset reflected in Obama’s comments has clearly been the government’s modus operandi.

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There’s not much to celebrate in California these days, unless of course you’re a Lakers fan.

The essentially broke state has a $24 billion budget gap and the White House says it’s not willing to bail it out.

As we noted earlier this week, the Obama administration’s decision not to rescue California is the right one, especially considering if it did save it, other struggling states would come looking for handouts as well.

But that doesn’t help Californians at the moment. Infectious Greed blogger and California resident Paul Kedrosky looks at the prospects for his state and doesn’t come to an optimistic conclusion.

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Thoreau

After listening to Treasury Secretary Geithner spar with Congress yesterday over the Obama administration’s proposed new banking rules, our big takeaway is that it’s too complicated. Complex, convoluted rules and regulations are a sure-fire bet to be twisted and bent until loopholes big enough to drive a truck through them appear.

And, really, we’re almost two years into this mess. The problems are pretty exposed. Derivatives, leverage, bailout mentality. Why don’t the proposed rules deal with these issues in a clear, straightforward manner? As Henry David Thoreau implored us, “simplify, simplify, simplify.” Instead we get more beltway thinking. The Journal’s editorial page summed it up well yesterday:

The main idea behind the Obama Administration’s new financial revamp is essentially this: With more power and a modest reshuffling of the bureaucratic furniture, the same regulators who missed the last credit mania will somehow prevent the next one.

It’s one of those do something now ideas the government’s so fond of, like, say, the Troubled Asset Relief Program, that are adopted under duress and whose pitfalls become clear only after they’re enacted.

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US stocks have kept to a pretty narrow range since Monday’s selloff, and there isn’t much incentive for bulls or bears to vary that course today.

Economic data calendar is empty, but next week’s menu carries several closely watched readings, including May new and existing home sales, durable goods and final read on 1Q GDP. Two-day FOMC meeting begins Tuesday, should garner plenty of focus as investors wonder if the committee will offer any hints about future rate moves.

As an aside, interesting that stocks barely batted an eye at yesterday’s carnage in Treasurys. Options expiration may add some volatility to stocks today.

S&P futures point to flat open, up about 2; DJ futures up 14. Ten-year flat, yield at 3.85%.