Obama Speaks, JP Morgan Pops, Stops, Feds Love Banks

Sometimes you just have to sit back and take it all in, which is precisely what marketeers did today after JP Morgan put out a bogus earnings report prior to the open, and President Obama put down a line in the sand for Republicans over upcoming budgets.

Market futures pointed higher prior to the open after JP Morgan Chase (JPM) announced 1st quarter results, saying they beat wall Street expectations of $1.15 per share with a resounding $1.28 in the quarter. This sent the major indices off to the races at the open, but as soon as discoveries were made that Morgan's earnings figure was boosted by a 0.29 per share reduction in credit loan loss reserves, things began to turn ugly, and in a hurry.

After opening up 62 points to the good, the Dow Jones Industrials were seeing red by noon. Likewise, JP Morgan's 62 cent gain turned into a 76 cent loss (45.88) at the low of the day, just after 2:00 pm EDT. By the close, Morgan and the Dow had regained some ground, though JPM still finished down 39 cents and was quoted lower in the after-hours.

Around 2:00 pm, President Obama offered a retort to Republican Paul Ryan's proposed 2012 budget plan in a speech at George Washington University. The President outlined plans for cuts in defense spending and saving in Medicare and reiterated his 2008 campaign pledge to scale back the Bush tax cuts, saying he went along with Republican plans to extend them last year only so he could save middle class taxes from rising.

Obama's plan, in simple terms plans to cut the budget deficit by $4 trillion over the next 12 years, keeping intact the two largest entitlement programs, Medicare and Social Security, which was not mentioned for any revisions.

While the president was speaking, markets gyrated in both directions, finally heading into the positive, though only slightly, by the close. At the very least, the president did a good job of setting the parameters for a budget fight that figures to be a battle royale on Capitol Hill through the summer and into the fall.

Even though the markets broke a four-day losing streak, gains were minimal, the up early, lower later signature of trading was straight out of the bear market playbook.

Dow 12,270.99, +7.41 (0.06%)
NASDAQ 2,761.52, +16.73 (0.61%)
S&P 500 1,314.41, +0.25 (0.02%)
NYSE Composite 8,367.31, +6.85 (0.08%)

Advancers took back the edge over decliners, 3493-2976, but new highs and new lows were split, with a 46-46 tie on the NASDAQ and new highs bettering new lows, 50-15 on the NYSE. Volume was, as usual, uninspired.

NASDAQ Volume 1,766,435,000
NYSE Volume 4,275,430,000

Commodities snapped back to life with WTI crude futures gaining 86 cents, up to $107.11 on the NYMEX, snapping two-days of delightful declines. Gold picked up a gain of $2.00, to $1,455.60, while silver added 17 cents to $40.24.

The budget deal worked out last Friday now appears to be ready to pass both houses without much dissent, though some members of both parties have signaled that they would vote against the measure due to ideological values. A vote is scheduled for the House on Thursday.

In other news affecting JP Morgan and its cohorts (the 14 largest US banks), federal regulators slapped the collective wrists of the banks, but imposed no sanctions, fines or plausible remedies to foreclosure and mortgage servicing problems which surfaced last fall during the "robo-signing" scandal.

The Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Reserve and the Federal Deposit Insurance Corp. issued the settlement after markets had closed.

"The review uncovered unsafe and unsound practices, violations of law and foreclosure processes geared toward speed and quantity, instead of quality and accuracy," the OTS said in a statement.

That qualifies as the understatement of the decade. Not a single banker or functionary has been indicted, nor have any of the banks in question been subject to any serious scrutiny over their abuses that likely deprived many homeowners of due process.

This "agreement" leaves conditions almost as they were, with the banks still holding all the cards and homeowners getting no relief. It is expected that foreclosures will proceed through the courts as they have, with judges scrutinizing individual cases for flawed paperwork and other transgressions routine to the practice of the banking cartel.

Without a workable framework, the process will likely bog down the real estate market for the next five to ten years, as title defects, lost notes, fraudulent assignments and other illegal practices are given a green light by the nation's regulators. Obviously, some things in Washington remain just the same, as regulators look the other way when it comes to their favorites sons and campaign contributors.

Stocks Take Another Hit, But, Why?

Major US indices fell for a fourth consecutive session - with the exception of the Dow, which eked out a 1-point gain on Monday - and there are likely several reasons why this downtrend has continued and actually accelerated, with the biggest drop coming today.

After all, it is the beginning of earnings season, and first quarter results are expected to be pretty good. But is the market looking down the road, or could investors be wary of margin squeezes caused by runaway commodity prices, or consumer depression caused by over-the-top gas prices?

One thing's for sure: the winter was a long and cold one, and nobody got a break from high heating bills in a majority of the heating states of the Northeast and Midwest. That certainly couldn't have helped household budgets much and a Gallup poll released today suggests that Americans are as displeased with current and future conditions as they were this time in 2009 and through the middle of 2010.

The poll showed that only 33% of respondents in March think the economy is "getting better." That's a drop from 36% in February and 41% in January.

Another possibility is that the now-month-old tragedy in Japan is also worsening, as officials raised the level of the Fukushima Daiichi nuclear plant accident to 7, on a par with the disaster at Chernobyl, 25 years ago.

Perhaps the stock market wasn't really sold on the late-night budget deal reached on Friday night (We had expected this was only a continuing resolution and were right) and the potential that the deal could fall apart. Details are just beginning to trickle out that the cuts amount to much less than the $38.5 billion reported and that members of both parties, in bouth houses of congress, are displeased.

At Business Insider, Joe Weisenthal reports that the government might still shut down, this Friday. The AP has details from just where the phantom cuts are coming.

So, here we go again? The 2011 fiscal year ends September 30 (about 5 1/2 months from now), and the budget is still being trimmed, debated and flayed? This is no way to run a country, especially one as on the financial ropes as the USA. Get ready for more drama from the queens on Capitol Hill and at the White House.

The Hill has more detail on the cuts, which will go to a House floor vote on Thursday. The legislation is known as H.R. 1473, for those wishing to keep score at home.

Notwithstanding the aforementioned possibilities and potentialities, the Fed's ending of thier policy of handing over free money to Primary Dealers in June, via QE2, might be on the minds of many in the investment world. When that nearly $100 billion a month stops, so might Wall Street's 2-year-long party. In a related note, the Fed released it's schedule of banker handouts (POMO) for the remainder of April through May 12.

All of this news added up to some big drops in the equity markets, centered around just about 1% overall. Commodities were hit even harder (see below).

Dow 12,263.58, -117.53 (0.95%)
NASDAQ 2,744.79, -26.72 (0.96%)
S&P 500 1,314.16, -10.30 (0.78%)
NYSE Composite 8,360.46, -85.31 (1.01%)

Declining issues clobbered advancers again, 4883-1663, a nearly 3:1 ratio, the largest of the past four sessions. On the NASDAQ, new lows overtook new highs, 56-39, but it was the other way around on the stubborn NYSE, with new highs holding a slim edge over new lows, 41-20. A similar pattern was witnessed in March, with the new lows overtaking new highs on both indices for 4-6 days, but the supposed correction was cut short by a surprise rally that now seems to have run up against resistance and is failing fast. Volume was not spectacular, and would most accurately be described as moribund. Another few days of this, and another row over continuing funding to the federal government could put the kibosh on 2011 gains, short and long term.

NASDAQ Volume 1,798,176,500
NYSE Volume 4,735,433,500

Oil took another massive hit in price on Tuesday, with WTI crude futures falling $3.67, to $106.25, and even lower after NYMEX trading closed. That's a two-day drop of $6.52 per barrel and motorists can only hope the trend continues. There are a lot of speculators in the market, and estimates range from them making up anywhere from 10-40% of the oil price.

Of course, in a real world, with real world consequences coming from an actually-functioning Justice Department, that would otherwise be known as price-fixing. Since the Attorney General hasn't been seen in six or eight months, and is generally regarded as the worst ever, don't expect anything like even an investigation to commence any time soon. We hear the name of the AG is Eric Holder, but nobody's been able to confirm that.

Along with oil, a good number of food and grain commodities are coming off their highs. Corn, soybeans and wheat were down the most, with lean hogs and live cattle following the trend. Gold slipped $14.50, to $1,453.60. Silver fell 55 cents, to settle in at $40.07 per ounce.

It has been said that one day does not make a trend, and there's truth in that, but maybe four straight declines in major indices are significant enough for somebody to take notice. It's no secret that the US system is largely bankrupt and operating on fumes and smoke, so it might be just a matter of time for the markets to correct. Naturally, the meddling Fed has kept the rally going with oodles of cash, and just to be sure, they gave some to the wives of some already-rich bankers, as Matt Taibbi reports for Rolling Stone.

Fair warning: reading Taibbi's latest story might lead to vomiting or breaking of inanimate objects. Strap in securely, as this story reveals just how corrupt and unbalanced the entire bailout process has been and continues to be.

Paging Ron Paul, paging Ron Paul. The country is calling on you to run for president.

No Euphoria Over Budget Deal, Earnings

One might have expected some kind of reaction from the stock market after Friday night's final hour deal to keep the government running, or even from advance interest in the deluge of upcoming corporate earnings reports, but, despite an early session push higher, stocks drifted lower and lower throughout the session.

The Dow jumped out of the gate to an early high, up 62 points, but gave all expect one paltry point back as the day progressed.

While the theory may be that the government was supposed to remain open and in business, so no, the stock market would not react, the reality is that since the major indices bumped headlong into resistance on Wednesday, there's been nothing but retreat and even a robust earnings season (which is unlikely) may not be able to shake the markets from their sideways-down direction.

On the day, the Dow Jones Industrials, the smallest index by numbers (30 stocks), though the largest by measure, was the only one to post a gain in any of the past three sessions, and even that was somewhat of an aberration caused by heavy buying of Alcoa at the close.

As it was, Alcoa (AA), the world's largest aluminum manufacturer, and traditionally the first company in the Dow to report, was off 15 cents at the close (17.77) and was trading marginally higher (+0.06) in after-hours trading. The company reported earnings of 28 cents per share, a penny above estimates, but revenue short of expectations by almost two per cent.

Dow 12,381.11, +1.06 (0.01%)
NASDAQ 2,771.51, -8.91 (0.32%)
S&P 500 1,324.46, -3.71 (0.28%)
NYSE Composite 8,445.77, -38.17 (0.45%)

Even though stocks finished with small movement, declining issues danced all over advancers, 4471-2165, a ratio of more than 2:1. New highs on the NASDAQ totaled a mere 59, with 32hitting new lows. On the NYSE, new highs led the way, 108-16, over new lows. Volume, on the first day of the week, was encouraging, as it was not horrible, though still just barely with a pulse.

NASDAQ Volume 2,039,947,625
NYSE Volume 3,841,427,750

Thanks to some large positions being taken off, notably by Goldman Sachs, the oil rally came to an abrupt halt on Monday. WTI crude futures fell $2.85, to $109.92 and were down even more after the NYMEX close. Gold dropped $6.00, to $1,468.10, while silver managed to remain flat, at $40.61.

With the budget deal due to be singed and passed sometime this week, investors will be focusing squarely on quarterly reports over the next few weeks, and prospects are said to be good, with the vast majority of companies meeting or beating Wall Street expectations.

The Morning After: Budget Battle Bad Drama

With apologies to anyone with an IQ over 40, the entire week-long, all-enveloping budget fight and threatened government shutdown was nothing more than a well-orchestrated test run on the American psyche.

There was never any chance of the government shutting down over the slim array of ideological and money issues which faced congress and the president, and in the end, what actually emerged from the "eleventh hour" save of face was not a deal to end the budget debate, but a deal to extend it a week further, with new conditions, including a rider to limit abortions in the District of Columbia and another that promises studies to be conducted on the financial regulation measures passed last year, known as Dodd-Frank.

In the end, the congress and the president only agreed to extend the process another week, so there's still a possibility that negotiations could drag into another government shutdown scenario, though that seems unlikely.

The more plausible case is that lawmakers finally close the books on the 2011 budget, the Republicans get roughly $38.5 billion in cuts, funding for NPR and Planned Parenthood is retained, and the fight resumes over raising the debt ceiling in the next few weeks.

That fight may be even more precarious, as Tea Party Republicans will once again threaten to shut down the government instead of approving more borrowing and spending.

What has become clear from the recent budget spates is that the key actors - Senator Harry Reid, House leader Boehner and president Obama, have demonstrated a willingness to put drama before rational governance and to use the American public as pawns in their inside game of chicken.

If a deal is struck - finally - by Thursday or Friday (still unclear as to the exact next shutdown clock), then the 2011 budget can finally be put to rest.

Through this entire process, though especially at the end, the politicians were roundly criticized for their bickering and theatrics. A government shutdown - which still may occur - was widely hailed as unacceptable by Americans across a broad spectrum and the lawmakers took heed, rushed back to their conferences and passed a bill to avert a shutdown at the last minute.

It's pretty clear that had public support favored a shutdown, congress would have gone home and taken a few days off. Expect the next threatened shutdown to include paying active military service members but not much else. The plan is still on the tables of both parties to furlough up to 800,000 non-essential federal employees, with the goal being a permanent reduction in the federal workforce.

This most recent ploy was just a warm-up act. The real deal or no deal will come later this year, possibly this month.

Deal on Budget Announced, Not Final, Government Remains in Business... for now

Within the past few moments, House Speaker John Boehner made a brief appearance and announced that a deal for funding the remainder of the 2011 budget has been reached.

Since the hour is so late, the House and Senate must vote on what turns out to be the seventh continuing resolution to keep the government functioning. Said resolution will fund the government for the next four or five days (Boehner did not go into specifics) until the final bill is written, approved and delivered to both houses, voted upon and eventually submitted to the president.

The final budget agreement should be completed and passed in law by mid-week, according to Boehner and other sources close to the negotiations, though neither Senator Reid, majority leader in the Senate, nor President Obama has yet to comment.

In the final analysis - and, it should be noted that this is by no means final - this entire exercise has been a prime example of the abject failure that is our federal government. The suspected cuts come to about $39 billion, but do not include any cuts to the defense department and are mostly directed at programs that affect primarily lower and middle class citizens.

The lawmakers missed the deadline. They will not vote on the continuing resolution until after midnight. A small technicality, but sometimes, detail matters, a fact completely lost on the current crop of poseur politicians in our nation's capitol.

The rape of our nation and much of the planet will continue. We remain the laughing stock of the world, our position in first place remains unchallenged in any way.

Added, 11:15 pm EDT: President Obama and Senator Reid have just spoken, both confirm that a deal has been struck. Reid confirms that the continuing resolution will last through Thursday (six full days for it to all fall apart, again).

Senator Mitch McConnell, the senate minority leader, could not resist the temptation to flap his gums a bit. Said little of importance, as usual. Everybody takes victory laps, even though nobody won.

Next up are showdowns on raising the debt ceiling and the fiscal year 2012 budget. This is not over, not by a long shot. This is only the beginning of more and more politics, all leading up to the general elections in 2012, should we all not die of boredom or disgust before then.