Market Talk

Stocks looked like they might stage a rally in the premarket session, but it’s not really showing up in regular trading. That’s because the focus is turning back to the U.S. and the recovery here, and how that’s showing up in this season’s earnings report.

US stock futures modestly lower premarket following yesterday’s big SEC settlement with Goldman Sachs, Google 2Q results, as well as results from GE and BofA this morning.

Stock markets currently higher in Europe, mixed in Asia overnight. Looks as if investors in Japan are more worried about the US economy than US investors — the Nikkei slumped nearly 3% to its lowest level in more than a month as the yen soared vs the dollar on fears over US growth prospects.

GS up 4.5% premarket; GOOG down 4% as results missed expectations. GE off 1.1% as revenue declined overall, falling in three of five business segments. But there was improvement at GE Capital.

June CPI due at 8:30am; Reuters/Univ of Michigan consumer sentiment out at 9:55am. S&P futures off 0.90; 10-yr slightly lower, yield at 2.98%.

- SEC reaches a $550 million settlement with Goldman Sachs. “The regulators get to claim victory while the Eloi get to continue their frolic atop the fluffy clouds of privilege and untouchability,” Josh Brown writes at The Reformed Broker. “Nobody admits wrongdoing, rightdoing or frankly, admits anything at all for that matter.”

- “This is surely a massive win for Goldman, whose entire business was at stake if it was found guilty of serious wrongdoing,” Reuters blogger Felix Salmon says. “The risk, of course, is that Goldman’s victory here will only serve to exacerbate its arrogance. Could the Squids of West Street become even more insufferable, now?”

- Business Insider has a list of winners and losers in the Goldman fraud settlement case.

- Lots of data to digest this morning, and most of it isn’t promising. Producer prices fall for third straight month and manufacturing data was weak. Headline jobless claims number looks good, but seasonal adjustments played a large role in the better-than-expected figure. “Due to the seasonal issues around the adjustments with GM doing the opposite of what they’ve historically done has made initial claims more difficult to analyze for a few weeks,” says Miller Tabak’s Peter Boockvar. “One thing though is for sure, up to 3 million workers will be falling off the extended claims rolls as benefits run out.”

- Naked Capitalism blogger Yves Smith relays an interesting nugget from HousingWire: for every one home currently on the market, two are waiting to be sold. “The scary part here is this estimate of market overhang refers only to foreclosed and distressed property,” she says. “There is another category of hidden inventory, people who would like to sell but aren’t even listing their houses.”

- Oil has finally stopped gushing into the Gulf. For now, as BP tests a new containment cap.

- Apple’s (AAPL) acquisition of mapping company Poly9 marks the second maps-focused company AAPL has bought in the last year. “In the short term, and with Poly9 specifically, Apple is buying its Google Earth,” Business Insider’s Dan Frommer says. “But more broadly, Apple is preparing for life after Google.”

- H-P’s (HPQ) Android tablet, which was supposed to hit the market in 4Q, has been delayed and won’t ship before the end of the year, Digital Daily blogger John Paczkowski reports, citing anonymous sources. Reason for the delay aren’t clear. “Perhaps, H-P has decided to focus its resources on the future webOS slate PC that its new Palm unit is developing,” he says. “Or perhaps the company is reconsidering its multi-OS tablet strategy in light of the Palm acquisition. After all, H-P has said repeatedly it is ‘doubling down’ on webOS.”

- “Even as lenders struggle to pull themselves out of the credit crisis, signs of a new and potentially dangerous infatuation with risky borrowers are emerging,” WSJ reports.

- Pretty pumped to see Carlos Beltran patrolling center field once again for the Mets.

Dow Jones’ Brendan Conway reports:

Traders had a field day with Goldman Sachs’ (GS) call options, including those that expire tomorrow, late in the session after SEC says a “significant announcement” is coming.

Traders rightly predicted it’s the long-awaited settlement.

Nearly two-thirds of the day’s 153,000 Goldman call contracts conveying the right to buy shares changed hands in the final half hour, notes OptionMonster’s Jon Najarian, who says activity “exploded” on the news.

July options expire tomorrow, meaning traders who picked up near-term contracts are anticipating an immediate burst for the shares. $150 calls expiring tomorrow make money if GS can rise 4% or higher Friday to breach $151.10.

Trading after the close is nearly there: GS is up 5.2% to $152.71 after hours.

Sit back and take a deep breath, there’s a ton of news to digest today.

US stocks stage a furious late-day rally and close mixed as Senate passes financial overhaul bill, but more importantly, speculation swirled late in the day that a settlement had been reached between the SEC and Goldman Sachs (GS) over the fraud lawsuit.

Headlines crossed after the closing bell confirming the rumor, saying Goldman agreed to pay $550 million to settle the charges. SEC’s planning to hold a news conference any minute.

Dow snaps its seven-day winning streak, closes down 7 at 10359, but was down as much as 126 earlier in the session before recovering. S&P 500 rises 1 to 1096 and Nasdaq Comp slightly drops 0.8 to 2249.

JPMorgan kicked off the day by generating strong 2Q profits, although revenue fell in four of its six lines of business. Additionally, there was a plethora of economic data this morning which can be described as suspect, at best. Producer prices fall for third straight month and manufacturing data was weak. Jobless claims dip to two-year low, but seasonal factors skewed the data.

But all the fireworks came after hours. In addition to Goldman, Google shares are sliding 4% in late trading after the Internet giant reported 2Q earnings that missed analysts expectations.

WSJ also reports latest developments surrounding the scandalous iPhone 4, saying Apple (AAPL) overruled internal concerns about antenna reception and denied carriers the proper time to test the device before selling it.

Hectic week ends with a busy day tomorrow as GE, BofA and Citi all report quarterly results. As Art Cashin always says, stay nimble, folks.

Just when I thought I could not possibly get more outraged by anything I hear about government bailouts, I read this from the Times:

When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Societe Generale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years.

Um, excuse me? Am I to understand that the U.S. government, which was about to hand over nearly $200 billion to AIG, forced it to agree not to sue any of the banks it owed money to, even if it should it later find out that any of them committed, oh, you know, fraud? Is that what my government brokered?

This is the kind of agreement that, say, a corporation might make one sign when they’re letting you go, but giving you a little severance package, know what I mean? Why in the world would the U.S. government, which was about to fork over an almost unheard of amount of taxpayer money, want to force to AIG to give up any legal chance to recoup any of that money? It would make sense if it was the banks forcing that issue, but for the government to…

A-ha! A-ha!

“Another way to read this requirement is that the Fed and Treasury were opposed to having fraud at the banks exposed, period,” Yves Smith writes at naked capitalism. “That is a very troubling stance for bank regulators to take.”

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Here’s a hint for bankers who continue to whine about being disliked: Stop with the condescension.

We got another dose of it today from Goldman Sachs, in comments from the company’s head European flack. It’s the same refrain we’ve heard countless times now since the onset of the financial crisis, and it goes something like this: We understand the public is upset, so we need to do a better job of explaining what we do and how we do it.

Baloney. That’s just a back-handed way of saying people outside the industry aren’t really bright enough to understand how we make money, and if they did, they’d really appreciate us for our benevolence and unflinching ethical behavior.

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(Editor’s note: the embedding code for some reason originally put David Cottle’s video in this space. While we’re fans of David’s, let him plug his videos on his own blog. Hopefully, we’ve now got this fixed.)

This is the bulls moment to take this thing back. The euro’s stabilized, even as Goldman Sachs throws in the towel on its estimates, and data out of Asia look better. But there are still counterweights: weekly jobless claims remain stubbornly stuck around 450,000, and the financial regulation bill is nearing its final form, which will likely crimp some bank profits.

It’s the Markets Hub.

Goldman Sachs (GS) shares among the worst-performing financial stocks today, after the Financial Crisis Inquiry Commission voices its stern displeasure with the firm. FCIC said late yesterday Goldman initially stalled on requests for documents, and then dumped hundreds of millions of pages of stuff on the committee in what looks like a “you-want-documents?-here’s-your-stupid-documents” hissy fit.

“I am hard pressed to name any management team that is more politically tone deaf than the group that was once thought of as a brain trust,” Barry Ritholtz writes at the Big Picture. “Are they secretly fans of Matt Taibbi – and this is a way to help generate more material for him?”

He’s not the only one mystified by Goldman’s apparent truculence. “It’s surprising, to say the least, that Goldman would risk precisely what took place: having a subpoena issued and the resulting media commentary, which again would focus attention on the continuing investigations against the firm,” Yves Smith writes at naked capitalism.

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- Several big name hedge-fund managers are placing bullish bets on Citi (C) and Bank of America (BAC). “Paulson, Soros, Falcone, Tepper, Ackman, Ainslie, Loeb — you name it, they own one or the other…or both,” Joshua Brown writes at The Reformed Broker. “And they own them in size.” But why the sudden interest?

- Goldman Sachs (GS) may be on the verge of resolving SEC’s fraud charge by agreeing to a settlement worth hundreds of millions of dollars, according to FT. But FusionIQ CEO Barry Ritholtz is still perplexed why GS chose to fight this charge in the first place. “Even if GS were to prevail in court, they have already lost. The reputational damage is already measured in billions of dollars, and will last years if not decades.”

- Furious decline in newspaper ad sales eased in 1Q, but struggling industry still isn’t showing signs of rebounding. “The less-awful sales in the first months of this year gave publishers the gift of a bit more time to fundamentally reposition their businesses,” Newsosaur blogger Alan Mutter says. “But there is nothing in the first-quarter numbers to suggest that the storm for newspapers has blown over.”

- S&P 500 has averaged a 0.12% gain on the Friday before Memorial Day since 1971, with positive returns coming 59% of the time, Bespoke Investment Group reports. But the performance hasn’t been so hot recently, with the index averaging a 0.28% decline throughout the last 10 years, firm notes. And the measure has dropped more than 1% on three instances in last decade.

- Warren Buffett’s testimony next week before FCIC is subpoena-driven, writes Fortune senior editor-at-large Carol Loomis, a pal of the Berkshire Hathaway (BRKA BRKB) chairman.

- FASB publishes proposal that would overhaul how companies value many assets and liabilities they hold. “Tremble US financial institutions, for FASB is about to fair value your assets,” FT’s Alphaville says.

- There are still calls for more (yes, more) government spending. “The long-term deficit needs attention, but right now it’s critical for government to spend,” says former labor secretary Robert Reich. “Otherwise we have no hope of getting free of the gravitational pull of this recession.”

- If enough tech giants go after a market, will it eventually catch on? Just a week after Google unveiled details of Google TV, Engadget reports Apple (AAPL) will take another crack at its three-year-old Apple TV product. But as MarketWatch’s John Dvorak pointed out in a column last week, it may be a hard slog, even for the biggest of behemoths.

- “The Great Recession is over, and the Great Transition is here,” James Picerno writes. In theory, distinguishing between the two is a piece of cake. In practice, reading the tea leaves is going to get complicated at times.”

- The Apple faithful struggle figuring out the best way to carry around the iPad. Aw, poor fanboys, such a conundrum – what are they gonna do??