Stock Market News for June 9, 2009

U.S. stocks pared early losses and ended the day mixed, helped by a late-day surge in banking shares.  Treasury prices declined for another day, pushing yields higher.  Financials also took a cue from Princeton University economist Paul Krugman who noted, “there’s some reason to think that we’re stabilizing.”  Trading was volatile on Monday and the Dow Jones Industrial Average, which had shed almost 130 points earlier in the session, closed the day just above unchanged.  The S&P 500 index closed 0.95 point lower and the tech-heavy Nasdaq lost seven points.  Volume on the NYSE was light as only 1.1 billion shares exchanged hands.

With the government’s plan to sell $65 billion in debt this week, investors remain concerned that interest rates could be hiked sooner than expected.  Investors are also awaiting news from the Treasury Department, which is expected to announce which banks will be allowed to repay funds borrowed under the Troubled Asset Relief Program.  On Monday, some media reports suggested the US government will allow ten banks to pay back at least $50 billion in TARP funds.  The reports said JP Morgan Chase & Co (NYSE:JPM - Analyst Report) is among the banks cleared to pay back TARP funds.  The list is also expected to include Goldman Sachs (NYSE:GS - Analyst Report), American Express (NYSE:AXP - Analyst Report), Bank of New York Mellon (NYSE:BK - Snapshot Report), Capital One (NYSE:COF - Analyst Report) and State Street (NYSE:STT - Snapshot Report).  Countering interest rate hike expectations, however, were remarks which pointed out that the Fed has never begun raising interest rates before the unemployment rate, now at a 26-year high, has begun to fall.

Treasury yields continued higher yesterday, reflecting increased hope of an economic recovery.  The 2-year was up 12 basis points to 1.43% and the 10-year rose 5 basis points to 3.91%.  Commodities declined, with basic material sector shares falling 1.5%.  Crude prices continue to fall for the second day, easing 0.5% to $68.08 and copper was off 1.4%; gold prices dropped 1.1%. Alcoa (NYSE:AA - Snapshot Report) led the decliners on the DJIA with a 1.6% fall.  US Steel (NYSE:X - Analyst Report) fell 3.7%, and Freeport-McMoRan (NYSE:FCX - Analyst Report) declined 1.2%. Also those companies generating a large percentage of overseas revenues weakened on the stronger dollar, with DuPont (NYSE:DD - Analyst Report) shares off 2.9%. Financials were the leading gainers on the DJIA, with American Express (NYSE:AXP - Analyst Report) closing up 2.8%, JP Morgan (NYSE:JPM - Analyst Report) rising 2.4%, and Bank of America (NYSE:BAC - Analyst Report) registering a 1.7% advance.

Texas Instruments’ (NYSE:TXN - Analyst Report) second quarter revenue and earnings guidance and remarks from Intel (NASDAQ:INTC - Analyst Report) that the first quarter represented a "bottom" in the PC market intensified hopes of an economic recovery.  Texas Instruments (NYSE:TXN - Analyst Report) raised its revenue guidance to $2.3 billion to $2.5 billion from its prior view of $1.95 billion to $2.4 billion, and earnings per share view to 14 cents to 22 cents from its earlier view of 1 cent to 15 cents a share. 

Meanwhile, after the markets closed, the Supreme Court granted a stay in the sale of Chrysler’s assets to Italian automaker Fiat.  The stay is expected to delay the bankruptcy proceedings and heighten nerves over the cost of automakers' bankruptcy in broad US employment numbers.