Market Talk

US stocks drop, despite the kind of news that usually gets a rally going, after Chinese stocks endure their worst selloff in a year.

DJIA loses 48 (0.5%) to 9496, still gaining 3.5% on the month, and up five of the last six months. S&P 500 loses 8 (0.8%) to 1021, Nasdaq Comp drops 20 (1%) to 2009.

While August’s gains were the smallest of the five risers, still, it is a gain. But August has been pretty profitable for investors anyhow this decade. The Dow is up six of the last seven Augusts, including last year. It lost ground in 2005. August 2009 was the best August since 2000.

August has trailed only December in terms of stock market gains historically. On the other hand, the worst month, September, begins tomorrow.

Now, for the S&P 500, the gains were even sharper. The S&P posted its sixth straight monthly gain, and is up nearly 39% in that time, it’s best six-month advance since September 1938, according to S&P. Now, for the six months before the past six months, the S&P lost nearly 43%, the worst six months since June 1932.

“Result: the full one-year V was a bit short on the right side, with a 20.44% decline,” says S&P’s senior index analyst Howard Silverblatt.

Market gets two M&A deals today, with Disney buying Marvel and Baker Hughes buying BJ Services. Additionally, ISM-Chicago shows improvement in manufacturing sector, which augurs well for tomorrow’s national reading. But it’s the Chinese selloff that sets the tone early, and bulls can’t shake it.

China’s Shanghai fell 6.7% overnight, and lost 10% over the past three sessions, the worst three-day stretch since June 2008. The index lost 22% in August. And that’s got some folks jumpy.

Welcome to September.

Dow Jones’ Eduardo Kaplan and I talk M&A, manucturing and China:

Surprised? Ah, yeah. Did I hear you say "TARP profit"?

Finance bloggers will never be confused for shy, quiet people. They’re more than willing to do a full-out takedown of something that sparks their ire.

A few bloggers were rather incensed today after The New York Times and Financial Times each published stories detailing how the government is supposedly profiting off of the hundreds of billions of dollars spent on bank bailouts.

Even if the Treasury is making money off the eight biggest banks that have repaid their TARP obligations, losses from AIG, Fannie Mae (FNM), Freddie Mac (FRE), GM and Chrysler can’t be ignored, bloggers say.

And other costs associated with TARP, such as lost tax revenues and stimulus plans, must be accounted for before discussing TARP profitability.

Nevertheless, NYT presents the case that taxpayers will benefit from the bailouts because Treasury is making money off the TARP, with Goldman Sachs (GS) and Morgan Stanley (MS) providing highest return on investment.

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Dow Jones Newswires’ Brian Baskin writes:

Baker Hughes (BHI) and BJ Services (BJS) have almost nothing in common, making them perfect candidates for a merger, Jefferies writes.

 BJ Services service makes up less than 1% of Baker Hughes’s 2008 revenue. Baker Hughes is expanding internationally, while BJ Services is largely focused on the flailing US and Canadian markets.

Of course, North American pressure pumping is one of the hardest hit portions of the services sector, but “BHI needed to add pressure pumping to its product mix…it makes strong strategic sense over the course of the cycle,” firm adds.

But BJ Services shares are trading below the premium being offered by Baker Hughes, signaling that investors aren’t optimistic that their new BHI shares will hold their value. Not a bad move in the short term – Baker Hughes is “paying a stratospheric multiple of ‘10 earnings,” given the weak state of BJ Services’ core market for North America gas services, writes Simmons & Co.

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don't worry, the government's got this one.

It shouldn’t surprise any of our readers that we here at Market Talk have been extremely skeptical of this purported economic recovery that’s fueled stocks nearly 50% above the March lows. But when a prominently bearish figure in the blogosphere turns slightly positive, we definitely step back and take note.

University of California, San Diego economics professor James Hamilton says he’s shifting his stance on the economy back to neutral and away from the “general grumpiness” that he’s felt since the beginning of 2008. Favorable auto sales and housing data as well as better-than-expected reports on consumption and new orders for durable and capital goods prompts him to proclaim the economy’s improving and output’s actually growing slowly instead of declining.

He does caution, however, that the recession’s not over and rising unemployment still hinders growth prospects.

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Here you go, drink this. Now go buy a house.

If you’re not a subscriber to Dow Jones’ wires services, then you probably don’t know Jim Murphy, who writes the twice-daily Mark To Market column (and is described in his bio as the “resident iconoclast.”)

Mark To Market is one of the most popular features on the Broadtape, as we call it, hearkening back to the days, long before any of us were around, when the wire was actually delivered physically via ticker tape machines.

Murphy made, as he always does, a great point today about some of the data you’ll be hearing about this week, and what it really says about the state of the economy. The problem is, he says, that a lot of the data are getting a big boost from government largesse:

Here is the conundrum: To a large, but not exclusive extent, August’s strength in vehicle sales will reflect the stimulus of the federal government’s cash for clunkers program. The unanswerable question is, How would General Motors, Chrysler and Ford have fared if there were no cash for clunkers program? The other facet of the conundrum is this question: Should economic indicators goosed by the government count for as much as economic indicators covering areas on which the government has not laid its intrusive hands?

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Premarket stock futures signal a weaker start for US markets, as investors ready for a bevy of economic data this week, including August ISM readings, data on construction spending and pending home sales and Friday’s August employment report.

All this comes during a week where trading volumes are likely to be light, and market moves choppy and exaggerated. Another sharp decline for stocks in Shanghai overnight, along with a pullback in crude oil prices help contribute to softer tone in Paris and Frankfurt, while London’s on holiday.

Chicago August PMI due at 9:45 a.m. ET; Dallas Fed’s Aug manufacturing outlook at 10:30 a.m.

S&P futures down 7.30; DJ futures down 62. Ten-year higher, yield at 3.42%.

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US stocks mostly lower on a quiet August day, despite Intel’s boost to its sales forecast, as the rally shows some signs of flagging strength.

DJIA loses 36 (0.4%) to 9544, still up about 0.4% on the week, although the index blew its eight-day winning streak. S&P 500 eases 2 to 1029, Nasdaq adds 1 to 2029, helped by Intel’s sales boost, which lifts tech shares. Healthcare stocks fall, but financials eek out a gain, with that curious quintet of Citi, BofA, Fannie, Freddie, AIG all rising.

This morning’s income and spending report was mixed, and a take on consumer confidence was weak. Tiffany’s earnings better than expected, company boosts outlook.

You might be tempted to draw a bright picture from the numbers out of the Commerce Department and Tiffany. After all, on a monthly basis, consumer spending did rise for a third month. And Tiffany beat expectations, which must means consumers are scooping up those pretty Tiffany-blue boxes with the expensive gifts inside them.

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Madeleine Lim and myself break it down reports on consumer spending and income, Intel’s sales forecast and Japan’s rising unemployment, worsening deflation – and big election.

I got three AIG, two Citi and a Freddie.

US stocks trading lower, with the Dow’s eight-day winning streak in jeopardy, as new data show consumer sentiment dropped this month.

But as the broader indexes fall, a handful of  high-profile financials that have skyrocketed this month keep rising. Shares of AIG, Citigroup (C), Bank of America (BAC), Fannie Mae (FNM) and Freddie Mac (FRE) were all up early on heavy volume, yet again. (BofA has since slide into the red.) The five stocks have combined to account for more than 30% of trading volume since Aug. 5, according to WSJ’s Market Data Group.

Speculators are feasting off these names, as AIG, FNM and FRE have all surged more than 230% since July 31, while BofA’s more than doubled and Citi’s up 59%.

Enjoy the gains while they last, however, as the massive rally in these stocks doesn’t look sustainable. The run-up in these financial stocks may also be the final piece of evidence that causes the market’s six-month rally to finally run out of steam, says Chad Brand, founder and president of Peridot Capital Management.

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