Market Talk

- Gold hit a fresh record high yesterday just as the euro and stocks also gained, while the VIX fell to a six-week low. “Maybe the strange cross-currents were a sign that some market players were wrapping up their week a day early and heading for the beach,” Tom Petruno says. “In fact, Friday might be a good day to take off.” Spot on – Dow finishes up 16 in a sleepy session.

- Not much action out of Palm since word of acquisition by H-P (HPQ), but expect that to change in the near future, Digital Daily blogger John Paczkowski says. At a developer event yesterday, PALM developer liaison Josh Marinacci offered some of the company’s upcoming plans. “We are working on future devices. And a new version of the OS. So I think you’re going to find the next year very exciting.”

- It appears the White House may be changing its mind on reining in CEO pay, according to The Huffington Post. But the change doesn’t seem to be garnering the attention it deserves. “Well, the BP disaster, in particular the intense press coverage of this week, appears to have provided the Administration with some very useful air cover, by diverting public attention from the final rounds in the battle to reform Wall Street,” Yves Smith says.

- Investor sentiment readings this week were mixed. “Although far from extreme bearishness, this level of optimism is consistent with an oversold market, but does not necessarily signify that all is clear,” Pragmatic Capitalism notes. “The majority of the reliable short-term buy signals have coincided with lower levels of bullishness.”

- Ratings agencies played a prominent role in the financial crisis, but the big three agencies have “escaped much blame, liability and scrutiny for most of the post-crisis period,” FusionIQ CEO Barry Ritholtz writes. But that may be coming to an end.

- Enthusiasm for Apple’s (AAPL) iPad has been obscured by excitement over its new iPhone 4, but DigiTimes says the tablet computer is moving quickly. The Taiwanese technology publication says iPad monthly shipments reached a whopping 1.2M units and could balloon to 2.5M by year’s end.

- Nevada registers the highest monthly state unemployment rate in May, coming in at a staggering 14%, marking the first time in four years Michigan wasn’t awarded the dubious distinction, according to a new Labor Department report (via NYT’s Economix blog). By contrast Michigan’s rate was 13.6%.

- Twitter’s strong growth continues. ComScore reports the microblogging service registered 90.2M unique visitors last month, a 7.6% increase from 83.8M uniques in April. “After a lull in the winter, it’s clear that Twitter is back on track,” TechCrunch says.

- “No one will pay any heed to the now discredited Greenspan who ironically was worshiped for all the things he got wrong and ignored the few times he ever said anything that made any sense,” Mish opines.

- WSJ’s Jim Chairusm writes about why the lost US goal in the Slovenia game today shouldn’t matter.

- Good ol’ Thomas Brown is at it again. Yes, the same Thomas Brown who called the bottom in bank stocks in July 2008. Now he’s saying Nouriel Roubini and Meredith Whitney are too bearish on the banking sector.

- GDP’s 1Q revised down to 3.0% represents only a “minor disappointment” amid current economic recovery, Ryan Avent writes at The Economist’s Free Exchange blog. “America’s recovery remains young and fragile. Still, many developed nations would be happy to have a nine-month performance like the one the American economy has managed since returning to growth.”

- BofA and Citi incorrectly hid from investors billions of dollars of their debt, similar to what Lehman did to obscure its level of risk, WSJ reports, citing company documents.

-WSJ’s Matt Phillips wonders if Libor fears are overdone.

- FT’s Alphaville relays a century-long look at the US equity market, via Deutsche Bank. Blog wonders whether we’re currently mired in a cyclical bull market within a longer, structural bear market?”

- “I believe the government response to the recession has created budgetary stress sufficient to bring about the crisis much sooner. Our generation — not our grandchildren’s — will have to deal with the consequences,” David Einhorn says in his NYT op-ed.

- Banks aren’t short of cash to spend on lobbying Washington to make sure serious financial reform never gets passed. But considering what’s at stake, the best hope for stronger reform is to make the upcoming House-Senate conference in June more transparent, writes Simon Johnson, former IMF chief economist.

- Palm’s mobile design guru, Matias Duarte — who led webOS development — is leaving the company and is headed to Google (GOOG), Digital Daily blogger John Paczkowski reports, noting Duarte’s departure is a “significant loss” for Palm and H-P.

- Blogosphere has been abuzz about rumors that Microsoft (MSFT) CEO Steve Ballmer would appear on stage at Apple’s Worldwide Developer Conference. But Microsoft quickly squashes those rumors. “Steve Ballmer not speaking at Apple Dev Conf. Nor appearing on Dancing with the Stars. Not riding in the Belmont. Just FYI,” Microsoft says via Twitter.

- Obama says he’s “angry and frustrated” over the spill in the gulf.

- The surging US dollar is “eerily reminiscent of the peak worries in the credit crisis when deflation appeared to be taking a death grip on the global economy,” the Pragmatic Capitalist says. “As asset prices decline and bond yields collapse this is a clear sign that inflation is not the near-term concern, but rather that the debt based deflationary trends continue to dominate global economic trends.”

- University of Oregon economics professor Mark Thoma isn’t on board with Yale professor Robert Shiller’s argument in a NYT op-ed that fears of double-dip recession could become a self-fulfilling prophecy. Bigger economic shocks would seem “the more likely trigger” of double-dip, Thoma says. “Even more likely is an outbreak of extreme hawkishness causing us to pull back too fast on fiscal stimulus, and to raise interest rates too fast.”

- Turns out Palm’s sale to Hewlett-Packard (HPQ) last month wasn’t exactly a last-minute deal. Digital Daily blogger John Paczkowski points to a PALM SEC filing, which reveals the buyout process began in February and the company was in contact with 16 potential acquirers.

- HAMP April data shows program slowing down.

- The “shock and awe” effects of Europe’s big bailout package are already starting to fade, and the concern is that long-term viability is being sacrificed for short-term gains, Pimco CEO Mohamed El-Erian writes at FT’s Alphaville blog. So far, the package is just giving investors an escape hatch, without addressing the real issue: solvency.

- GM isn’t putting on the hard sell for an IPO.

- Reuters blogger Felix Salmon looks at how government bailouts affect moral hazard and the role they play in market volatility. “A lot of investors have made a lot of money from the moral-hazard trade over the past 15 years or so. When that trade comes to an end, expect the losses to be just as big, if not bigger.”

- Ryan Avent shows how the role the declining euro plays in the global economy.

- Though it’s still early for conclusive evidence, it appears Apple’s (AAPL) Mac sales haven’t been cannibalized by the iPad, Digital Daily blogger John Paczkowski says, citing research from Piper Jaffray.

- Jason Zweig looks at the debate over holding brokers to a higher standard.

- Can we have new regulation cake, and eat it too? “After 30 years of deregulation, it’s time for the rebirth of regulation: Not heavy-handed and unnecessarily costly regulation, but regulation that’s up to the task of protecting the public from companies and executives that will do almost anything to make a buck,” former labor secretary Robert Reich says.

- It’s still not clear whether the aftermath of the Great Recession will result in new financial regulation that’s “more than window dressing designed to appease voters without actually curtailing financial sector activity,” University of Oregon economics professor Mark Thoma writes.

- Deals on Palm phones are there for the taking, with Amazon (AMZN) selling the Pre Plus only for a penny. “That’s right, the next generation version of the phone that former Palm Ceo Ed Colligan once described as a ‘significantly better product’ deserving of a higher price than Apple’s (AAPL) iPhone is selling for a penny at Amazon,” Digital Daily blogger John Paczkowski says.

- Recent weakness in China stock market doesn’t bode well, Peter Boockvar notes. Shanghai index currently sits at lowest level since last autumn, it’s down 11 of the past 13 sessions and off 14% year-to-date.

- The nature of contagion is that people act on the rumor and ignore everything else,” Ryan Avent writes at Economist’s Free Exchange blog. “Back in 2008, markets attacked financial firms indiscriminately, even as bank executives pleaded that their finances were sound. They were, in some cases, quite right. But liquidity crises, if left unchecked, become insolvency crises. The panic becomes self-fulfilling.”

- Pimco CEO Mohamed El-Erian says the Greek crisis is far from over.

- S&P 500 fast approaching its 50-day moving average. “While the 50-day is typically thought of as a key support level, the last time it came into play for the S&P 500 was back in January, and the index didn’t blink before breaking well below it back then,” Bespoke says.

- Microsoft’s (MSFT) Internet Explorer — the 300-pound gorilla of the Internet browser market — continues to lose weight.

- Peter Kafka live blogs News Corp’s earnings call with Rupert Murdoch.

- Michael Comeau at Minyanville explains why Apple (AAPL) can pretty much get away with whatever it wants.

- The Apple/Adobe war over Flash jumps to a new level: Apple (AAPL) CEO Steve Jobs uncharacteristically pens a post weighing in on his decision not to support Flash.

- Adobe’s (ADBE) CEO responds.

- Hewlett-Packard (HPQ) acquiring Palm prompts Digital Daily blogger John Paczkowski to ask: “Why spend $1.2 billion on a company whose downward spiral has been the talk of Silicon Valley for the past year?” The answer is relatively simple — H-P wants its own operating system, which is exactly what Palm has to offer.

- What does the Fed’s “extended period” really mean? NYT’s Economix and Calculated Risk weigh in.

- Hewlett-Packard (HPQ) is taking a page out of Apple’s playbook: It wants an operating system it completely controls without relying on Microsoft’s (MSFT) Windows. Unfortunately, Dan Frommer at Silicon Alley Insider isn’t optimistic about the plan.

- Greece fizzles…But the Dow sizzles.

- “The uptrend remains in place, and until it is broken we maintain an upside bias,” Barry Ritholtz says. “We are not at the sorts of extremes yet that make the contrarian in us scream ‘sell.’”

- Why do markets pay any attention to ratings agencies?

- Initial jobless claims dropped 11,000 to 448,000 last week. “If you’ve been following the soap opera with this data series you know that we’ll need to see something more dramatic before the central bank changes its monetary tune of standing pat,” James Picerno writes at The Capital Spectator.

- Paul Kedrosky looks at stocks vs flows relating to consumer solvency.

US stocks post their biggest gain in almost two months as investors put worries about European debt woes aside for a day and focus on strong earnings reports and improving manufacturing conditions in the Midwest.

DJIA rises 122 to 11167, its biggest gain since March 5. S&P 500 jumps 15 to 1207 and Nasdaq Comp rises 40 to 2512. All 10 S&P 500 sectors finish higher, with finanicals, industrials and consumer discretionary leading the way.

Investors were jittery after S&P downgraded Greece, Portugal and Spain. But no one’s downgraded today and stocks soar.

Go figure.

Hewlett-Packard (HPQ) proves to be Palm’s white night, swooping in and buying the embattled smartphone pioneer late yesterday for about $1B. Palm shares soared 26% to $5.84, above H-P’s $5.70 bid. H-P drops 0.8% to $52.88.

Exxon’s 1Q earnings soared 38%, but still fell short of analysts’ expectations, in part due to a $200 million charge tied to US health care legislation. Shares fell 0.8% to $68.66.

And WSJ just reported Continental (CAL) and UAL Corp.’s (UAUA) United Airlines are expected to announce Monday that they’re merging. A combination would form the world’s largest airline by traffic.

- It’s getting scary across the pond. “The question now is how far this will spread,” Paul Krugman writes. “I’m looking at the spread between Italian and German bonds. It’s getting a bit scary out there.”

- “The US Treasury market is in an interesting place where we have seen a flight to safety this week and a Fed that may keep rates low forever on one hand and an improving economy, rising commodity prices and a financial situation in the US that doesn’t look much different than Greece on the other,” Peter Boockvar says.

- Most troubling aspect of S&P’s downgrade of Greece isn’t that the country’s debt has been slashed to junk. “The real problem is that the losses on default are likely to be far steeper than is typical for sovereign borrowers,” Yves Smith writes at naked capitalism.

- Maybe there’s no need to overreact regarding European’s increasing debt woes, The Economist’s Free Exchange blog says. “The situation is salvageable, and for now the right outlook is one of concern rather than panic.”

- Do CDOs have social value? James Kwak, Arnold Kling and Frank Partnoy discuss at NYT’s Room for Debate blog.

- At yesterday’s Senate hearing, Goldman Sachs (GS) CEO Lloyd Blankfein “trod the fine line between not being apologetic and actually saying ‘it’s capitalism, stupid’ and the more junior executives interrogated did not say anything blatantly incriminating,” former IMF chief economist Simon Johnson observes.

- Peter Kafka live blogs H-P’s conference call in which the company explains why it’s buying Palm.

- “The Nexus One may not be a bestseller, but perhaps that’s beside the point,” PCWorld’s Jeff Bertolucci says. “The phone has served as an Android demo unit, one that shows handset and app developers what the Android platform is capable of. Indeed, more manufacturers are introducing Android devices — a development that will certainly boost Google’s mobile market share.”

- NYT’s Bits blog wonders whether Gizmodo has any chance of winning the iPhone battle.

- AOL’s turnaround still isn’t here, evidenced by 1Q revenue falling 23% and ad sales dropping 19%. Not a good sign, especially since both Google (GOOG) and Yahoo (YHOO) posted significant revenue growth. But, as Kafka points out, AOL CEO Tim Armstrong still has a grace period to rebuild the company before investors expect to see tangible results.

US stocks close higher, shrugging off another credit downgrade in Europe, as investors were happy to hear the Fed will keep short-term interest rates near zero for an “extended period.”

DJIA closes up 53 to 11045, after a brief foray under the 11000 mark. S&P 500 jumps 8 to 1191 and Nasdaq Comp rises 0.26 to 2472.

Stocks plunged yesterday on renewed contagion fears after S&P downgraded Greece and Portugal. But today the market took S&P’s downgrade of Spain in stride. Financials and energy were S&P 500′s biggest gainers; consumer discretionary the only sector to finish in the red.

After the closing bell, news broke that Palm finally found a buyer, although the acquirer comes as a bit of a surprise. Hewlett-Packard (HPQ) announces plans to acquire the embattled smartphone pioneer for nearly $1 billion.

H-P is paying $5.70 a share, a 23% premium to Wednesday’s closing price. Including debt, the deal is valued at $1.2 billion. Hewlett-Packard will be getting WebOS software, which can set it apart from the rest of the Google (GOOG) Android-using pack.

Palm shares soared 28% to $5.93 in after-hours trading, topping the offer price and suggesting investors may be looking for additional, higher bids. Palm garnered some interest from Asian technology companies, including Lenovo (LNVGY) and HTC (HTCXF), but it was never clear how legitimate their interest was.

(Roger Cheng contributed to this post.)

- It’s debatable whether technicals or valuation are driving stocks higher, but “excessively bullish sentiment is the biggest risk right now,” Barry Ritholtz writes at The Big Picture.

- The ratings agencies’ flaws need to be addressed. “Perhaps the recent attention to the role the ratings agencies played in the crisis will change that, but I’m certainly not counting on it,” Mark Thoma says on his blog.

- It’s hard to see how Palm considering licensing its WebOS platform to other hardware makers could ultimately be successful, especially as Google’s (GOOG) Android popularity rises, Dan Frommer writes at Silicon Alley Insider. “While licensing WebOS might make a sexy story to tell potential acquirers or Wall Street, it’s not going to save Palm.”

- Can’t be too defensive, right? “I do recognize that my credibility in sounding a cautious note would presently be stronger if I had ignored further credit risks and captured some of the past year’s gains,” John Hussman says. “But the awful outcome of this same set of conditions, which we also observed in 2007, should provide enough credibility.”

- Newspaper circulations keep declining, as average weekday sales have dropped almost 9% since last year, NYT’s Media Decoder writes, citing data from the Audit Bureau of Circulations. “The reality facing American newspaper publishers continues to look stark.”

- “It’s ironic how the ‘Goldman was so smart to have shorted subprime’ meme is now being turned on its head…as Goldman’s conduct in the run-up to the crisis is being re-examined in a new light, Yves Smith writes at naked capitalism.

- Felix Salmon details the continuing Goldman wars.

- Whirpool (WHR) shares soared after its blowout 1Q report. “I continue to think that the panic a year ago was greatly overdone, as individuals and companies cut costs wherever they could, while waiting to find out if forecasts of Great Depression II were going to be borne out,” NYT’s Floyd Norris says. “But now the spending — and the hiring — is coming from people and companies that overreacted in the panic.”

- Google’s (GOOG) decision to scrap plans to sell Nexus One through Verizon Wireless seems a bit curious.

- The current bull market has now gone 400 days without a 10% correction, Chad Brand notes.

- Shouldn’t shock anyone that Greece finally folds, with Prime Minister George Papandreou saying it’s time for “support mechanism” to be activated. “The meltdown in their bond market this week made it an inevitability,” says Miller Tabak’s Peter Boockvar.

- As Greece requests for aid, keep in mind the yield on all the debt of weak eurozone governments widened yesterday while German yields fell. “The spreads show all you need to know: a very clear and large contagion risk,” Peter Boone and Simon Johnson write at The Baseline Scenario.

- Growing number of pundits suggesting SEC’s case against Goldman Sachs (GS) isn’t as strong as it seems, which puzzles Stephen Gandel. “The issue is not that Goldman got someone to place a bet with Paulson, but that that bet was rigged from the start,” he says.

- Apple (AAPL) shares hit yet another all-time high this morning, prompting LA Times’ Tom Petruno to wonder whether anything can stop the “Apple stock juggernaut.”

- James Altucher highlights why Apple’s (AAPL) stock could soar to $1,000. On the flip side, Brett Arends posts seven reasons Apple shareholders should be cautious.

- Barry Ritholtz tries to clarify any uncertainty pertaining to SEC’s fraud charges against Goldman Sachs (GS). “The aggressive SEC posture, the huge reaction from Goldie, and the short term market verdict all suggest there is more coming.”

- Palm shares get a boost on reports that Lenovo is a leading candidate to buy the company for $1.3B. But investors shouldn’t get their hopes up. “Logic dictates that Lenovo is an unlikely savior,” Larry Dignan writes at ZDNet.

- MarketBeat’s Matt Phillips offers an earnings season update.

- “In many ways, Netflix exemplifies the ‘jobless recovery,’” Josh Brown writes at The Reformed Broker. “Here is a company that has very few employees that benefits from a large population of people sitting around the house with nothing to do. Renting a movie is the very cheapest form of entertainment after crossword puzzles, no wonder that thing is on fire.”

- WSJ publishes its summer movie preview.