Market Talk

US stocks modestly rise, but show little conviction, after Fed’s beige book report, Obama’s speech and consumer credit data.

DJIA gains 46, or 0.5%, to 10387, and has risen five times in last six days. But Newswires columnist Tomi Kilgore finds some reason for caution:

The DJIA might look strong, since it has held onto most of its gains throughout the day, but the inability to get through resistance after a third attempt should put bulls on edge. The DJIA’s intraday high is 10427, following highs of 10447 and 10451 the past two sessions. Meanwhile, the 200-day moving average has been coming in right around 10450. The DJIA was recently up 40 at 10381. If the DJIA can’t get above the 200-day tomorrow, a test of the 50-day moving average, which comes in around 10286, should follow shortly. Meanwhile, a close above the 200-day would target the Aug. 9 high of 10720.

Meanwhile, S&P 500 gains 7, or 0.6%, to 1099, yet still can’t shake the psychologically-significant 1100 level. Nasdaq Comp jumps 20, or 0.9%, to 2229. Volume was weak again.

Encouraging developments from European banks helped shed yesterday’s pessimism. But Fed says economy hit soft patch in July and through August and Obama introduces new policies to kick start economy. Consumer credit in July also dropped for sixth-straight month.

Stocks stage a modest rally as S&P 500 hovers around 11o0 yet again before closing at 1099. But the longer the index keeps lingering around that level, the more restless strategists are becoming.

The index crossed under 1100 in May and has essentially traded sideways since then and hasn’t shown any signs of breaking out of the trading range its been stuck in for months. And with 2010 about 3/4 over, a bunch of strategists have cut their year-end S&P 500 price targets.

Bespoke Investment Group cites Bloomberg’s weekly survey which shows strategists’ average target has dropped to 1205, about 20 points lower than the beginning of year. And five of 12 strategists surveyed have also lowered targets after boosting them earlier in 2010.

JPMorgan’s Thomas Lee and BofA’s David Bianco continue believing S&P 500 will end the year at 1300 by year’s end, while Deutche Bank’s Blinky Chadha is even more bullish, holding a 1375 target, which would represent a 25% jump from current levels.

S&P 500 at 1205 by year’s end would mark 10% gains from where it currently stands. Even that would be quite the run-up over the last quarter of the year, but maybe it’s not so far-fetched.

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Fed tries to put its best foot forward in the latest Beige Book report, noting “continued growth in national economic activity,” while still acknowledging “widespread signs of a deceleration” compared to preceding periods. It’s a forty-three page report, so in an attempt to cut to the chase and distill the key message, we took an admittedly unscientific but hopefully insightful shortcut.

We counted how many times the report mentioned the word “weak” or other derivation (weakness, weaker, weakening, etc), and compared it to other recent BB reports.

In this latest report, the bank used “weak” or other derivative 65 times. That compares to 53 times in the July report and 45 in June. Obviously an uptick in “weakness,” but down from 84 mentions in March, and 94 in July of last year. On the precipice of recession in November 2007, the Beige Book mentioned weak etc 61 times.

Conversely, the Fed mentioned the word “improve” or some other derivation 54 times in today’s report. That’s down from 68 in July and way down from 107 mentions in June.

It’s no deep-dive into the nitty gritty, folks, but seems suggestive of the economy’s direction, at least.

Also interesting to note, the Fed increased its use of the adverb “quite” for added emphasis to some of its observations, as follows:

Demand for commercial real estate remained quite weak but showed signs of stabilization in
some areas.

Upward price pressures remained quite limited for most categories of final goods and services, despite higher prices for selected commodities such as grains and some industrial materials.

Most Districts reported little or no change from existing low levels of commercial and industrial lending, as businesses remained quite cautious about expansion plans.

A recent flurry of refinancing activity spurred increased demand for residential mortgages in the New York, Cleveland, Chicago, and Kansas City Districts, but new-purchase mortgage originations remained quite sluggish in general.

With builders holding off on new construction, inventories have gotten quite low,
though prices still seem to be drifting lower.

Think we’ve seen quite enough.

Gone, but not forgotten (nor the debt forgiven.)

On Sunday, I’ll be at the “New Meadowlands Stadium” in New Jersey for the Giants’ debut in their new home. I’ll be there early for the tailgate. I’ll be in the stands, yelling my head off and overpaying for beer. I’ll be there, ahem, late for the tailgate. It’s pretty much an all-day affair.

I’ll also be one of the thousands walking through the parking lot that covers the space where the old stadium once stood. The original stadium. Giants Stadium. That stadium is gone, torn down this spring. But its debt lives on.

If you want to understand why state and local finances across the country are such a wreck, why the capital of Pennsylvania, for instance, actually just flat-out defaulted on a debt payment, look no further than the series of  stupid, emotional deals local governments made for sports stadiums.

As the Times reports today, New Jersey still owes about $110 million on the stadium, even though it was just torn down. It goes without saying that a vanished building is no longer a revenue-generating asset, so taxpayers in the Garden State are going to end up paying the tab for a private enterprise’s (the Giants and Jets) whimsical idea to tear down the old one and build a new one that would generate even more revenue — for the teams that built it.

Harrisburg’s problem was an incinerator deal. In Jefferson County, Ala., it was a sewer system. In Seattle, Indianapolis, Philadelphia, residents are paying for stadiums that no longer exist.

How could so many different governing councils make so many bad decisions? The specific reasons may vary, but the ultimate conclusion must be clear: bad management. And don’t think it gets any better at the national level. It doesn’t. But these bad managers have managed to achieve one concrete goal: maintaining power.

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So, the news is pretty much the same as yesterday, but the stock market is rising today, where it fell yesterday. The euro, incidentally, is at about the same place today as it was this time yesterday (although it fell overnight,) but the stock market is rising today, where it fell yesterday.

What gives? We break it down for you on the Markets Hub.

Irish eyes are not smiling this morning.

So equities traders here in the old USA aren’t worried about European debt today, it seems judging by stock futures, whereas yesterday they were all in a tizzy about it. Does that make sense? No, it doesn’t, so you should ignore the stock moves (unless, of course, you’re actively trading, in which case, all that matters are the numbers,) and focus on, you know, the news. And the news is still coming out of Europe.

The cost of credit default swaps on Irish debt hit a record today on increasing worries over the state of Irish banks. This after the government extended its blanket guarantee of private banking debt (was supposed to run out the end of this month, now they’re extending it to the end of the year. Just seems like nobody can get those exit strategies kicking in, can they?)

Neil Shah reports over at MarketBeat:

Ireland, which is grappling with an increasingly costly bailout for troubled lender Anglo Irish Bank, isn’t alone. Concerns about the health of Europe’s banking system have unleashed a wave of risk aversion that is engulfing other countries on Europe’s fringe too. Portugal’s credit-insurance costs have jumped to $342,000 from $330,000, while Greece’s costs have hit $916,000 from $895,000.

It’s not just Irish CDS, either. Spreads on bond yields between Germany and some of the so-called periphery countries are rising. The spread between Greek bonds and German bonds is at a four-month high of 948 basis points, very close to the record 973 it was sitting at before the Europeans unveiled their grand bailout plan.

That tells you that despite the near trillion dollar safety net the Europeans threw at their collective economies, investors are still worried. It’s not at panic levels, but beads of sweat of forming on the collective European brow.

Sell-off in US stocks yesterday carried into Asian markets overnight, while European stocks currently posting moderate gains. The euro has recovered from a sharp slide overnight, which helps set the table for a modestly positive open for US stocks.

Nothing notable on the data front this morning; this afternoon the Fed releases the latest Beige Book commentary on regional economic conditions at 2:00 p.m. ET. July consumer credit due at 3:00 p.m. Revolving credit hasn’t increased since September 2008, or 21 straight months through June, a streak that seems likely to continue.

S&P futures up 4.30, DJ futures up 34. Ten-year note a tad lower, yield at 2.62%.