Market Talk

US stocks close lower, although the blue chips hold up better than the Nasdaq Comp, which drops as tech shares fall after Dell’s disappointing earnings. But overall the day was, as UBS’ Art Cashin is fond of saying, a waste of a clean shirt and cab fare.

The risk trade’s that been so on fire has cooled as the dollar’s gained ground. DJIA loses 14 to 10319, still up about 0.5% for the week. S&P 500 dips 4 to 1091, down 2 points on the week. Nasdaq Comp loses 11 (0.5%) to 2146. Healthcare drives gainers. Stocks were weak early, but a late burst mitigates the losses.

Still, the Dow’s down three straight days, and that hasn’t happened since the three days from Sept. 30 to Oct. 2. But, it’s also up three straight weeks, and that’s the longest streak since Aug. 7.

Crude gained 0.5% on the week, gold gained 2.7% on the week, hitting yet another closing high today, at $1,146.40.

Equities volume was very light, which could set up for a very interesting week coming up. Since Thursday is Thanksgiving, there likely won’t be a lot of people around, but there is a lot of data on tap. That could possibly lead to some exaggerated moves in one direction or another.

Elsewhere around the glob, the ECB’s talking about exit strategies, and Japan meanwhile is staring at outright deflation. Let’s hope it’s not their newest export.

Harvard economist Jeff Frankel posts an interesting graphic detailing the economy’s roller coaster ride since peaking in Dec 2007.

Index of Leading Economic Indicators leads the train, as it rose for a seventh consecutive month in October, followed by consumer confidence, which has hit some bumps throughout the ride, but still remains substantially higher than it was in February, Frankel says.

“The important middle cars, which represent measures of aggregate output, probably reached bottom in the early summer, and then started back up,” he adds.

To be sure, the unemployment measures lag the rest of the train, as they typically do.

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Today on Tomorrow’s News Today, we discuss the ECB’s opinion on stimulus programs, as well as stocks and bonds and technical levels, and that stupendous $12 trillion deficit.

Newswires columnist Max Murphy writes:

Worked pretty well last time, why not try it again?

Put together Bank of America, Fortress Investment Group, and a new, $460 million CMBS issue backed by commercial real estate in Florida. What could possibly go wrong?

Call us once bitten, twice shy, but it seems a little soon to be jumping back into the CMBS market, the collapse of which amid the recession roiled many investors and firms.

This is a bank, BofA, still in hock to the U.S. government because its descent into riskier assets like CMBS helped cause its need for tens of billions in emergency cash to survive. Many other banks have since regained sufficient health to repay their Treasury Department bailouts; BofA, not so much.

It’s partnered with troubled asset manager FIG, whose real estate assets are backing the seven-year issue. Things were so tough for Fig that 90% of its market capitalization vanished last year.

Add to this the fact that the properties are in Florida, one of the hardest hit real estate markets in the U.S. And, it’s not eligible for funding through the Treasury’s Term Asset-Backed Securities Loan Facility, or TALF, program.

This could end badly, right?

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You're doing a heck of a job, Geity.

Treasury Secretary Tim Geithner has his supporters, of course. First off, there’s the President. I’m sure, too, that his wife is very supportive of his efforts to restore fix the nation’s economy. Then, there’s, well, there’s…New York Times columnist David Brooks.

Brooks, generally a conservative voice in the paper, came out in support of what’s Geithner’s accomplished so far:

The evidence of the past eight months suggests that Geithner was mostly right and his critics were mostly wrong. The financial sector is in much better shape than it was then. TARP money is being repaid, and the debate now is what to do with the billions that were never needed. It now seems clear that nationalization would have been an unnecessary mistake — potentially expensive and dangerously disruptive.

Accept for a moment that most of that is true, the banks aren’t dangerously listing anymore, that the crisis is over and we’re on the road to recovery. What, exactly, did the Treasury Secretary contribute to that?

I’m serious. Somebody please tell me. Offhand, I can think of the “stress tests” and the PPIP, the Public-Private Investment Program. The first was no more than a thorough white-washing, and the second was just an awful idea that has yet to gain any appreciable traction.

So, somebody, anybody, please point out something specific the Treasury Secretary has done to make things better. Because I certainly couldn’t find anything in Brooks’s hyperbolic column.

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Don't cry, this isn't 2008 all over again.

An interesting, although not necessarily disconcerting, phenomenon is taking place in the Treasury market. Some short-term Treasury bill rates have turned negative today after inching below zero yesterday, meaning investors are effectively paying the government to hold their money.

The last time this occurred was in late 2008 when people were worried about the impending doom of the financial system. Those fears have prompted some to wonder if another devastating event is on the horizon.

“Could there be something more pressing and/or catalytic? We have not heard peep from any of the big banks in a while,” Tyler Durden writes at Zero Hedge.

But the consensus seems to believe that negative short-term T-bill yields are merely “a technical phenomenon” and not reason to start panicking again, John Jansen writes at Across The Curve.

“There is a massive wall of liquidity, a pile of cash which needs a home,” he says, which is helping drive yields lower. “Typically as the year end approaches clients tend to unwind profitable trades and reduce balance sheets. I think that some of that deleveraging process has created new piles of cash and that money needs a place to park.”

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To infinity and beyond!

The United States of America is $12 trillion in debt.

It’s actually worse than that, but let’s start there. The “National Debt Clock” above the IRS office on 45th Street in midtown Manhattan tripped the $12 trillion level this week. (It actually crossed the mark on Monday, according to the Treasury Department’s website, but I noticed it this morning.)

And that is just the actual, concrete debt. There are tens of trillions more in so-called unfunded liabilities — promises made to current and future recipients of Social Security and Medicare — that push the national debt up to somewhere in the $50-$60 trillion range.

How do you grasp a problem that big? It’s hard. The problem (with grasping it)  isn’t that the problem (the debt) isn’t real, it is painfully real, the problem is that it isn’t a problem the way, say, the collapse of Lehman Brothers was a problem. That is to say, in America today, if it doesn’t explode, people don’t see the problem.

But make no mistake, friends, this is a problem that will grind the economy into dust, in a gradual, evolutionary kind of way. It’ll take years, maybe decades, a slow, grueling, almost invisible force. But if we do not address this, now, we, and our children, will wake up one day in a far less prosperous place.

We are going down, as I first saw Harvard’s Greg Mankiw call it, an unsustainable path. And we are barreling down it.

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Stronger US dollar, disappointment with Dell’s 3Q results, weakness in Asian markets overnight and mixed picture in European trading all among the elements contributing to a negative premarket tone for US stocks.

Dollar index up almost 0.5% at 75.64, gold and oil backing down.

It is, obviously, very early, but the Dow’s riding a slight, two-day losing streak here, so another down day today would set it up for a very interesting couple of sessions next week, even as most folks are going to be sitting in airports (and hopefully not waiting amid endless delays after some computer in some back office melts down and crashes the entire grid.)

No economic data due today, but there’s a lot jammed into a holiday shortened week ahead. Readings on October homes sales (existing and new), September home prices from Case-Shiller, another look at 3Q GDP, November consumer confidence, October durable goods and personal income & spending are among the highlights packed into the first three days of next week.

S&P futures down 7.90; Dow futures off 67. Ten-year slightly higher, yield at 3.33%.

US stocks fall, although late buying limits the losses, as the dollar strengthens and chip stocks drag down tech shares after BofA-Merrill downgrades a number of chip makers, and some Treasury investors actually pay the government to hold their money.

DJIA loses 94 (0.9%) to 10332, S&P 500 falls 15 (1.3%) to 1095, Nasdaq Comp loses 36 (1.7%) to 2157. Treasurys rally, with some T-bill rates briefly turning negative. Crude drops, but gold hits a fresh closing high at $1,141.40.

It’s interesting to note that the S&P 500, after closing around 1109-1110 for three straight days, which is roughly the 50% retracement, has now fallen sharply. Getting over that hump — or not — will be a big marker for the bulls and technicians.

Jobless claims are flat, and continuing claims fall, but applications for extended emergency benefits are rising; that means folks are having a hard time finding jobs. Speaking of, AOL’s cutting a third of its staff. Philly Fed report shows some signs of strength.

Tech is the big loser today, after Merrill-BofA downgraded eight chip companies. The Philly Chip Index dropped 3.4%, and Intel lost 4.1%, and AMD dropped 3.7%.

That Treasury rally, especially the short end, should get your attention. The long end, 10-year and 30-year bonds, was essentially flat, but the short end, but yields on the one- and three-month T-bills, actually turned negative (although it seems they’re just in positive territory lately.)

“Treasury prices powered forward again Thursday as investors continued to position themselves for a long period of low interest rates and loaded up on the safest possible securities heading into year-end,” Newswires Deborah Blumberg wrote.

“The last time Bill yields turned negative (in essence investors paying the Government to hold their money for them) was in the days after the Lehman bankruptcy, when the entire world was about to blow up,” Tyler Durden writes at Zero Hedge. Now, the folks over at Zero Hedge are a jumpy lot, but it’s can’t be a very good sign to have investors paying the Fed to hold their money.

Today on Tomorrow’s News Today, we discuss jobless claims, AOL’s layoffs and the Philly Fed report.