Market Talk

US stocks gain for a sixth straight session, pushing the S&P 500 to a fresh year high, after CIT Group gets a reprieve from its bondholders and Conference Board reading on leading indicators points to a recovery. (Video recap here.)

DJIA gains 104 (1.2%) to 8848, S&P 500 rises 11 (1.1%) to 951, a closing high for the year, Nasdaq Comp gains 23 (1.2%) to 1909. It’s the Nasdaq’s ninth straight rising session, a streak it last hit in 1998.

CIT Group gets a reprieve from bondholders, who strike a deal that’ll give the company about $3 billion to play with. That doesn’t solve all its problems – CIT’s business model has basically been smashed by the credit crisis – but it gives it time to sort things out.

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We're getting rescue financing - without the government's help!

We made the argument last week that the government made the right move not bailing out CIT Group (CIT). That decision looks even smarter now that the lender is reportedly close to getting a $3 billion rescue package from its bondholders.

The deal should keep CIT out of bankruptcy court, at least in the short-term, WSJ reports, and it’ll help the lender pay off $1 billion in debt due next month.

From The Journal:

The deal, which was reviewed by CIT’s board Sunday night, charges CIT high interest rates, and it doesn’t permanently fix the company’s long-term financing needs, say people involved in the transaction. But it buys time for the lender to restructure itself, and minimizes bondholders’ losses. Bondholders calculated they would lose more if CIT filed for bankruptcy and sold assets at fire-sale prices than if they offered the rescue.

The deal, which the Journal says is expected to be formally announced later today, is “spectacularly good news” and marks a “major turning point in the history of the financial crisis,” Reuters blogger Felix Salmon says. It’s good for small and medium-sized businesses, CIT’s shareholders, CEO Jeffrey Peek and CIT’s bondholders, he notes.

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I'm paying in cash this week Harry.

At the end of a long post arguing the housing market isn’t near a bottom, Barry Ritholtz offers this:

For the first time in decades, the American consumer is in the process of saving money and deleveraging their balance sheets. After a 40-year credit binge, it’s long overdue. The process is likely to go on for years, as a new generation is losing confidence in the stock market, corporate America and their government.

That gets to something we’ve been thinking about for a while. There’s been a lot of talk about newly thrifty consumers. But when the dust completely settles, we wonder: will anything have really changed?

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Busy week for 2Q earnings reports as the season hits full stride, with nearly half the Dow Industrials issuing reports this week. Stocks are also getting a boost from news that CIT Group’s bondholders are apparently working on a $3B life preserver; something short of a bailout, but something that buys the company time.

S&P futures up 4.60, DJ futures up 35, off earlier highs. Commodities are getting frisky, oil futures pushing closer to $65/barrel again. Ten-year lower, yield at 3.70%.

Economic data calendar thins, however; not much notable beyond Thursday’s weekly jobless claims and June existing home sales numbers.

Bernanke goes to the Hill tomorrow to chat about monetary policy, and whatever else our esteemed lawmakers can dream up.

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