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Monday, July 13, 2009

Morning Market Report

The indeces lost territory for their fourth straight week last week. So, this weakness started about three weeks prior to the last jobs numbers. Stock futures look to be down slightly this morning. The Dow will test 8100 at the open. S&P looks down 5.5 and the NASDAQ is down 6. The markets in Asia were down across the board. The Chinese Hang Seng was down 2.56%, the Japanese NIKKEI was down 2.55%, while the Straits Times Index in Singapore was down 1.79%. Meanwhile, in Europe, it was the reverse. The British FTSE was up 1.18%, the German DAX was up 1.7%, while the Spanish Index was 1.15%.

The Dollar looks to be trading very close to flat against most major currencies. It's down .09% versus the Euro, down .15% versus the Yen, up .55% versus the Pound, and down .21% versus the Canadian Dollar. Meanwhile, crude oil is temporarily back above $60 per barrel, currently at $60.16. Oil closed at $59.89 on Friday, touching below $60 for the first time since March.

U.S. Treasury bonds look flat at the open. The ten year is up less than one hundredth of one percent. This comes after a monster week in which the ten year lost about 25 hundredth of a percent in the last five trading days. It's lost about 70 basis points since early June when it briefly touched 4%. Bonds around the world have gotten better this morning. In London all bonds got better. The five year Londong GILT lost four basis points, the ten year lost 3.6 basis points (thirty six thousandths of a percent), and the thirty year lost 2 basis points. In Germany, the results were similar. The ten year was even, the twenty year lost just under 2 basis points, and the thirty year lost just over two basis points.

Treasury Secretary, Tim Geithner, is in the Middle East reassuring foreign investors that U.S. Dollar policy won't hurt their investments.

Geithner will seek to reassure Gulf Arab states this week that U.S. dollar assets they hold in large quantities remain a strong investment.

A recent decline in Saudi foreign assets shows the purchase of U.S. Treasurys by Washington's Gulf allies, five having currencies pegged to the dollar, at levels seen in the past decades should no longer be taken for granted.

Geithner, offering assurances on the United States' ability to pull out of recession, is combining a visit to Saudi Arabia and the United Arab Emirates, the Arab world's largest and second-largest economies, with a trip to Europe.

Last month, Secretary Geithner was laughed at when he made similar comments to a group of Chinese college students.

Meanwhile, the CIT group, the financial services company, is warning of a ripple effect if it is forced into bankruptcy.

CIT Group Inc., the century-old lender that hasn’t been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers.

A collapse would ripple across the “small and medium-sized businesses who rely on CIT to operate -- to pay their vendors, ship goods to their customers and make their payroll,” the New York-based lender said in internal documents obtained by Bloomberg News that make the case for its importance to the U.S. economy. CIT spokesman Curt Ritter declined to comment on the documents.

My analysis:

Look for the Dow to test 8000 this week. Weakness continues to be where most of the pressure lie. Until and unless there is data to the opposite, most of the intermediate pressure, through the end of the summer, is still down. I still believe that in the next few months the Dow will hit somewhere between 7600-7200.

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