Market Talk

US stocks gain slightly, ahead of tomorrow’s hotly awaited jobs report, but for the most part, it’s another dull session.

DJIA adds 33 to 10607, S&P gains 5 to 1142, Nasdaq Comp slips 1 to 2300.

Boeing comprises more than half the Dow’s gains, after reporting 2009 deliveries rose 29% – although net new orders fell 79%.

December retail sales come in better than expected, which is good, but keep a little perspective: they’re being compared to the worst December in decades.

China unexpectedly raises interest rates, with an eye toward stanching inflation – or, perhaps we should say, a bubble.

- “If the bond vigilantes are ready to ride again, there should be little doubt who will be leading the charge,” Tom Petruno says.

- Big buzzword at CES this year is 3-D. But major problem facing TV manufacturers is they have lousy timing.

- Say it loud and clear, it’s a renter’s market. US apartment vacancy rates in 4Q jumped to a 30-year high, while rent prices keep falling.

- Nexus One’s product placement couldn’t be better.

- Apple (AAPL) is looking for new ways to touch its fans. The US Patent and Trademark Office publishes an APPL patent describing touch screens with pixels that both display information and receive touch instructions from the user, according to a blog post on Patently Apple.

- Rail traffic trending in the right direction. “The data continues to reflect a weak recovery, but the trend is positive for now and equity markets have remained robust as the rail data troughed and turned higher,” Pragmatic Capitalist says.

- “One striking aspect of the public debate about the future of derivatives – and how best to regulate them – is that almost all the available experts work for one of the major broker-dealers,” Simon Johnson says.

- Retailers generally reported above-average December sales. Discounters Costco and BJ’s fared well. But Abercrombie lagged behind other teen retailers.

- China unexpectedly raises key interbank rate.

- Believe it or not, GM expects to be profitable this year.

The latest revelation surrounding Tim Geithner has generated a spirited debate among your humble Market Talk editors: if and/or when will the Treasury Secretary get the boot?

Before we answer that question, here are the details. The NY Fed, when under Geithner’s leadership, reportedly told AIG to limit disclosures on CDS payments made to banks during the height of the financial crisis. Bloomberg has the scoop, citing emails between the NY Fed and AIG:

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”

Bloggers have been all over this story, ripping Geithner for his cagey, often-times evasive manuevering.

“This latest revelation confirms the Fed’s commitment to secrecy and, although troubling, at this point should come as no surprise,” Yves Smith writes at naked capitalism. “The clear intent was to hide the extent of the subsidies that flowed from the Fed and Treasury to the recipient banks. Charming.”

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Newswires’ Madeleine Lim wrote up the following snippet:

Some stats as reminder going into tomorrow’s jobs report, courtesy of RBS’s Alan Ruskin: According to BLS, a monthly change in employment of 107,000 is statistically significant for the payrolls report; a statistically significant change for the household survey is 400,000.

Market expectations range from -100,000 to +85,000, he notes. Dow Jones is projecting a 10,000 drop.

“The psychology of a positive or negative number looks enormous – and ridiculous!” he notes.

Madeleine and I have been making the point here and there, and we’ll probably make it again somewhere tomorrow, that there’s very little difference between a gain of 25,000 and a loss of 25,000 in a labor force of 150M some-odd workers. The trend is, of course, important. Losing 25,000 workers in a month is better than losing 700,000, and gaining 25,000 is even better.

But at this point, with capacity utilization still skimming near its record lows, there just aren’t too many positions left to cut. What matters now is job growth, material job growth, and that is nowhere on the horizon.

Watching the Dow throughout the last two and a half sessions has been like watching paint dry.

On Monday, Dow industrials kicked off the new year on a strong note, rising 156 points. But trading’s been essentially flat since then, down 12 on Tuesday, up 2 Wednesday and recently up 8.

Only one reason for such muted action: jobs, jobs, jobs. It seems traders are sitting on the sidelines this week without making any major bets in anticipation of tomorrow’s release of the December jobs report. It’s an important report to analyze as there’s a possibility that employment will record its first monthly gain in two years.

But don’t get too giddy if the reading turns out to be positive, as the labor market has a long way to go before returning to prosperity.

“It’s important to keep things in perspective,” the Pragmatic Capitalist says. A gain in jobs is “a drop in the bucket compared to the number of jobs lost during this recession,” blog says. “The road to recovery remains a long and difficult one.”

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Remember that thing we talked about - and for God's sake, man, don't let the press find out.

There are two conspiracy theories floating around getting a lot of attention: the assertion by Charles Biderman from TrimTabs that the government is propping up stock prices, and the notion put forth by Sprott Asset Management that the funding the federal budget has become one giant ponzi scheme.

Now, these aren’t just your usual tin-foil hat types talking here, and the fact that these claims are gaining traction shows that at the least, there’s a portion of the citizenry that just isn’t buying the official story line.

They are sort of reductio ad absurdum arguments, and one problem with them is that don’t actually make the case that would prove their point; rather, they draw their conclusions as the only possible explanation, given a lack of alternate conclusions.

Still, they raise troubling questions about the actual strength and durability of the economic recovery.

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Early tone looks a little softer for US stocks after two straight sessions of indecisive action. Bulls had a hot start Monday, but haven’t shown any inclination to follow through, and bears haven’t seized on the listlessness to make inroads of their own.

Data today might help sway activity, with December chain-store sales spilling out this morning, and weekly jobless claims set for 8:30 a.m.Initial and continuing claims have continued to abate, but keep an eye on claims for emergency benefits. They’ve continued to rise, indicating the total number of jobless collecting unemployment benefits has yet to drop in any appreciable way.

US dollar index stronger, up 0.5% at 77.88. Oil and gold predictably weaker. S&P futures down 3.50, DJ futures down 24. Ten-year lower, yield at 3.82%.