Market Talk

US stocks jump in thin trading, in the 2Q’s second to last day, as crude jumps back over $70 and Bernie Madoff gets 150 years (but, hey, he’ll be a free man in 2159.)

DJIA jumps 91 (1.1%) to 8529, S&P 500 gains 8 (0.9%) to 927, Nasdaq Comp adds 6 (0.3%) to 1844. Energy, consumer discretionary lead gainers, although it seems the latter is directly hurt by gains in the former.

Some of the gains at least are likely the so-called “window dressing” of fund managers looking to spruce up quarterly statements, although it seems like we had a lot of that last week. But unless the Dow loses 12% tomorrow, it will post very healthy gains in the 2Q. Whether it can sustain or build upon those gains is now the big question.

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And this, ladies, is the North Waziristan tribal region. One hot LZ.

Any concern for geopolitical risk seems to be missing from the US stock market. Come to think of it, it’s been gone for some time, replaced by a total fixation on the government’s attempts to stave off collapse of the financial system, and preoccupation with divining the exact time the recession will end.

Easy enough to understand that distraction – it’s hard to worry about international threats when a situation created within our own borders brought us to the brink.

But now that there’s at least some daylight between us and Armageddon, market’s aren’t paying much heed to saber-rattling in North Korea or Iran, or the trouble Pakistan’s having with the Taliban, for example. Continue reading…

It’s not surprising Fed chairman Ben Bernanke was grilled by lawmakers last week about his overall handling of the financial crisis, but some question whether the blasting was warranted.

The hostility Bernanke received shouldn’t shock anyone, Willem Buiter writes at FT’s Maverecon blog.

“Central banks and central bankers [have] become normal political actors, indeed partisan political actors,” he says. “They should not be surprised to be treated as such.”

It’s become “unavoidable, indeed desirable” that Bernanke’s role in the BofA/Merrill deal has become a big issue, he notes.

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The ferocious stock-market rally that saw indexes gain more than 30% in a three-month stretched has cooled in recent weeks. With the second quarter officially coming to an end tomorrow, the market is looking for actual growth to fuel a sustained recovery.

Unfortunately, that growth isn’t likely to come from the upcoming earnings season. From WSJ’s Ahead of the Tape column:

The current bull market has been fueled largely by wishful thinking. To go much further, some wishes need to start coming true.

Corporate earnings, for example, should recover one of these days. That day was likely not the second quarter, which ends on Tuesday. The season for reporting second-quarter profits starts next week , but companies might start preannouncing results soon. Wall Street analysts, on average, think earnings fell 34.9% year-over-year in the quarter, according to Thomson Financial.

First-quarter earnings beat expectations, but were still far down from a year earlier. Analysts don’t expect earnings to rebound until the fourth quarter. But stocks have risen in advance, which is not unusual.

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See this apple cart? Don't upset it.

The first data point in this week’s pile of them came through, and it’s this:

-2.30.

The Chicago Fed’s National Activity Index came in at -2.30 in May, slightly wider than April’s -2.27 reading. It’s not a top-tier indicator, like the jobs report that on tap for later this week, but it does show the economy was still stuck in recession in May. The index’s three-month moving average nudged ahead to -2.67 from -2.73; still negative, but not quite as negative as before.

There’s are bigger report on tap this week, to be sure. But the market’s been building a theme, the second-half recovery, and it’ll try hard to shoe-horn this week’s reports in it, no matter how they look in absolute terms.

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Holiday shortened week ahead and jam-packed with economic data. Prominent readings include Case-Shiller April home price index tomorrow; ADP June employment estimate, June ISM, May construction spending and pending home sales Wednesday; June NFP report, weekly jobless claims and May factory orders Thursday.

Regional reports from Chicago and Dallas Feds this morning. The Chicago Fed reported a slip in production and income data, taking its National Activity Index to -2.30 from -2.27 in April. The three-month average narrowed to -2.67, its fourth straight gain.

While the data calendar is full, offices and trading floors will likely be less crowded as we approach the holiday weekend, perhaps heightening volatility as the week progresses.

Stocks are higher in Europe; Hong Kong, Tokyo lower overnight. S&P futures up 2.80; DJ futures up 24. Ten-year a tad lower, yield at 3.51%.

(Paul Vigna contributed to this post.)