Market Talk

US stocks fall, although late buying limits the losses, as the dollar strengthens and chip stocks drag down tech shares after BofA-Merrill downgrades a number of chip makers, and some Treasury investors actually pay the government to hold their money.

DJIA loses 94 (0.9%) to 10332, S&P 500 falls 15 (1.3%) to 1095, Nasdaq Comp loses 36 (1.7%) to 2157. Treasurys rally, with some T-bill rates briefly turning negative. Crude drops, but gold hits a fresh closing high at $1,141.40.

It’s interesting to note that the S&P 500, after closing around 1109-1110 for three straight days, which is roughly the 50% retracement, has now fallen sharply. Getting over that hump — or not — will be a big marker for the bulls and technicians.

Jobless claims are flat, and continuing claims fall, but applications for extended emergency benefits are rising; that means folks are having a hard time finding jobs. Speaking of, AOL’s cutting a third of its staff. Philly Fed report shows some signs of strength.

Tech is the big loser today, after Merrill-BofA downgraded eight chip companies. The Philly Chip Index dropped 3.4%, and Intel lost 4.1%, and AMD dropped 3.7%.

That Treasury rally, especially the short end, should get your attention. The long end, 10-year and 30-year bonds, was essentially flat, but the short end, but yields on the one- and three-month T-bills, actually turned negative (although it seems they’re just in positive territory lately.)

“Treasury prices powered forward again Thursday as investors continued to position themselves for a long period of low interest rates and loaded up on the safest possible securities heading into year-end,” Newswires Deborah Blumberg wrote.

“The last time Bill yields turned negative (in essence investors paying the Government to hold their money for them) was in the days after the Lehman bankruptcy, when the entire world was about to blow up,” Tyler Durden writes at Zero Hedge. Now, the folks over at Zero Hedge are a jumpy lot, but it’s can’t be a very good sign to have investors paying the Fed to hold their money.

Today on Tomorrow’s News Today, we discuss jobless claims, AOL’s layoffs and the Philly Fed report.

Mortgage Bankers Association’s third-quarter delinquency survey came out today, and casual perusal leaves us wondering how anyone thinks the housing market is near a bottom.

What sticks out most is the the amplified deterioration in prime loans.

“Prime fixed-rate loans continue to represent the largest share of foreclosures started and the biggest driver of increase in foreclosures,” MBA economist Jay Brinkmann says.

One-third of foreclosures started in 3Q were on prime fixed-rate loans. And there’s more to come.

“The foreclosure numbers for prime fixed-rate loans will get worse because those loans represented 54 percent of the quarterly increase in loans 90 days or more past due but not yet in foreclosure,” Brinkmann says.

He also points out that there’s a little more than four million loans 90 days past due or in foreclosure; meanwhile, there’s 3.9 million new and existing homes currently for sale. Hard to say home prices have bottomed, considering that dynamic. Continue reading…

Overstock.com (OSTK) CEO Patrick Byrne, never one to shy away from controversy, stood up to criticism surrounding the unaudited 10-Q he filed earlier this week and maintained he made the best decision in a tricky situation.

To recap, Overstock fired its outside auditor, Grant Thornton, over a dispute related to the financial reporting of about a $700,000 overpayment to a business partner in February. On a conference call Wednesday evening, Overtock said it took the “conservative” approach to recognize the money as it was paid back rather than immediately record it as an asset, and disputed claims that the company was exhibiting “cookie jar accounting,” a term implying companies build up reserves in good times and uses them when times are bad to inflate their balance sheets.

PricewaterhouseCoopers, which was Overstock’s auditors at the time of the overpayment, advised that the accounting was kosher. But Overstock changed auditors and hired Grant Thornton in March.

Overstock then received a subpoena in September saying the SEC was investigating some of its financial statements. While Grant Thornton originally signed off on the move to recognize the overpayment as it was paid back, it supposedly had a change of heart once the SEC began investigating the matter, which Byrne said prompted Overstock to dismiss Grant Thornton.

“We have two firms telling us very different things, the opposite things,” Byrne said on the conference call.

Continue reading…

The dollar carry-trade seems to be unwinding, at least for a day, with stocks and commodities down broadly, although volume remains light. Gold is off its record pace, and, this shouldn’t surprise you, speculators have had a hand in the run-up. The dollar’s up, and the dollar index is up, as are Treasurys. Stocks are down sharply, with the DJIA off about 150 points.

Newswires’ Devon Maylie explains the situation with the yellow metal.

The truth shall set you free (although it may not get you reelected.)

You could be forgiven if you thought we had a little unscheduled burst of truth telling yesterday, because it sure did seem like some government official types were a little more candid than usual.

First there was a speech from St. Louis Fed President James Bullard, who suggested if the Fed stuck the path it’s taken in previous recessions, that it wouldn’t raise interest rates until 2012. This sparked quite a bit of talk. Typical Fedspeak on this point usually is no more specific than the boilerplate statement “rates will remain low for an extended period.” They don’t put actual dates on policy, lest the markets do something like, oh, you know, start a new carry trade with the dollar or something crazy like that.

Then there was a surprising statement from none other than our Treasury Secretary, Tim Geithner, a man who has been accused of being a bit too close to certain bankers, who called out the nation’s banks in a blunt statement at a small-business forum. Geithner was basically imploring the banks to start lending, because, you know, they’re not, and, well, they kind of got billions of dollars from the government with the idea that they would lend at least some of it out.

Continue reading…

Stronger US dollar has the bulls thinking about staying on the bench today — premarket US stock futures point to some moderate weakness when regular trading begins. Oil and gold also weaker with the dollar index up roughly 0.4% at 75.48.

Weekly jobless claims due at 8:30 a.m., with a slight increase expected. Beyond the headline initial and continuing claims, keep an eye on the number of folks resorting to “emergency unemployment benefits” as regular benefits run out. Considering the job losses already booked, it makes sense for the initial numbers to be waning. But those claiming EUC has continued to rise, with the rolls up by almost 300,000 to 3.5M since early September.

Conference Board’s Oct LEI, Philly Fed Nov manufacturing index both set for 10:00 a.m.

S&P futures down 8.30; Dow futures off 60. Ten-year note slightly higher, yield at 3.35%.