Thursday, August 27, 2009

U.S. stock market takes detour from positive economic data

The U.S. stock market continued a recent pattern Thursday by tracking the price of oil while shrugging off good news, with positive data seen as already factored into the market, while moves in China fueled worries about a recovery.

"This week was the first that we've seen recently where we didn't sell off on good news, but we also didn't continue to march higher," said Peter Boockvar, equity strategist at Miller Tabak.

"In the last couple of days, the market is showing signs of fatigue," Boockvar observed.

On Wall Street, energy shares pared earlier losses, with equities also erasing intraday declines to turn mildly higher as the price of crude oil rose to $72.49 a barrel on the New York Mercantile Exchange after earlier edging below the $70 mark. Read Futures Movers. (more)

Wall Street Journal Europe August 27 2009

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The American banking system is not improving...

The American banking system is not improving, the FDIC reports.

This morning, the government agency added 111 more lenders to its “problem bank” list, which now stands at a 15-year high of 416 banks. That’s nearly $300 billion in combined assets at risk. As always, the FDIC will not name names, lest the list might actually become useful.

What’s more, as we forecast Monday, the FDIC’s deposit insurance fund took a major hit in the second quarter. Even after raising $5.6 billion in replenishments, the fund fell from $13 billion to $10.4 billion. We hasten to add this still doesn’t account for the roughly $7 billion in losses occurred by the Colonial and Guaranty failures.

In all, FDIC insured banks reported a $3.7 billion net loss in the second quarter, only the second quarterly loss reported in the last 18 years.

The FDIC can borrow up to $500 billion from the Treasury for future bank failures and deposit rescues… hard to believe that they won’t be tapping that backstop soon.
Agora Financial

McAlvany weekly Commentary, August 26, 2009

Exchange Controls On The Horizon
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U.S. Dollar Likely to Gain Versus Loonie: Technical Analysis

Aug. 26 (Bloomberg) -- The U.S. dollar will likely extend its two-day advance against its Canadian counterpart after posting a “bullish daily reversal” yesterday, according to Citigroup Inc. A rally in the greenback to C$1.1126 against the Canadian dollar, nicknamed the loonie, “is expected,” technical analysts Tom Fitzpatrick in New York and Shyam Devani in London wrote in a note to clients today. “A close above there would be quite a bullish development over an extended period.” Canada’s currency dropped 1 percent to C$1.0974 per U.S. dollar at 4:43 p.m. in Toronto, after sliding 1 percent yesterday, its first loss in six days. One Canadian dollar buys 91.12 U.S. cents. A move to C$1.1126 would represent a 1.4 percent rise in the value of the U.S. dollar. (more)

Stocks led by four wounded horsemen

They say you can't trust the government. Don't tell that to Wall Street traders.

A bizarre trend has emerged during these hazy, lazy days of late summer. Overall market volume is unsurprisingly wafer-thin, but a big chunk of trading has been in just four financial companies that have received a healthy dose of support from Washington in order to make it through the credit crisis.

For the past few days, Citigroup (C, Fortune 500) (which taxpayers now own a third of), mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) (which were placed under government conservatorship last September) and Bank of America (BAC, Fortune 500) (which has needed $45 billion in bailout funds) have been far and away the most actively traded stocks on the New York Stock Exchange. (more)

Real US unemployment rate at 16 pct: Fed official

The real US unemployment rate is 16 percent if persons who have dropped out of the labor pool and those working less than they would like are counted, a Federal Reserve official said Wednesday.

"If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart.

He underscored that he was expressing his own views, which did "do not necessarily reflect those of my colleagues on the Federal Open Market Committee," the policy-setting body of the central bank. (more)