Stock Market News for June 10, 2009

Asian stock markets recorded sharp gains Wednesday, helped by a jump in commodity prices and hopes that the U.S. banking system is showing sings of buoyancy.  In Tokyo, the Nikkei 225 stock average jumped 2.1% to 9,991.49 and the Hang Seng index in Hong Kong surged more than 4% to close at 18,785.66.  Japanese investors shrugged off a report that suggested core machinery orders, a closely watched indicator of corporate capital spending, plunged to a 22-year low in April. South Korea’s benchmark Kospi jumped 3.1% and India’s Sensex added 2.3%.   

Yesterday, Wall Street responded with a yawn to Obama Administration’s announcement that 10 of the largest banks could repay $68 billion of government bailout cash.  Although Treasury Secretary Geithner, appearing before the Senate Appropriations Committee, noted the repayment of the bailout money was a sign of “financial repair,” stocks swung back and forth in a narrow range, signaling the much-expected announcement from the Treasury packed few surprises.  Technology stocks, buoyed by Texas Instruments’ (NYSE:TXN) better-than-expected earnings and sales outlook, pushed Nasdaq higher while the Dow Jones Industrial Average and broad based S&P 500 index ended the day mixed.  The Tech-heavy Nasdaq rose 17.73 points, or 0.96%, to close at 1860.13.  The DJIA slipped about 0.1% to close at 8,763.06.  The S&P added 0.4% to close at 942.43. 

Some big financial institutions have been eager to escape increased federal involvement and the restrictions that come with being part of the Troubled Asset Relief Program.  Although the Treasury did not name the banks cleared to pay back the TARP funds, the ten institutions quickly confirmed they have been allowed to exit the government’s financial assistance program.  Morgan Stanley (NYSE:MS), American Express (NYSE:AXP), JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), Bank of New York Mellon (NYSE:BK), BB&T (NYSE:BBT), Capital One (NYSE:COF), Northern Trust (NASDAQ:NTRS), State Street (NYSE:STT) and US Bancorp (NYSE:USB) were cleared to pay back the rescue funds.  Commenting on the move, JP Morgan Chase & Co (NYSE:JPM) CEO Jamie Dimon noted, “Paying back TARP at this time is the right thing for JPMorgan Chase, and it’s the right thing for our country.”  Financial sector shares edged up 0.4%, with American Express (NYSE:AXP) topping the list of gainers on the DJIA with a 5% jump, as traders were relieved that the industry's rising rates of card delinquencies and the potential for increased attendant loan losses had not prevented government approval of its repayments.

Following Texas Instruments' (NYSE:TXN) improved guidance, semiconductor shares rallied with Advanced Micro Devices (NYSE:AMD) closing up 3.1%, Intel (NASDAQ:INTC) rising 3.4%, and National Semiconductor (NYSE:NSM) closing up 4.4%. According to a Bank of America (NYSE:BAC) analyst note, Microchip Tech (NASDAQ:MCHP) has been witnessing improved China orders.  BofA raised its price target on the company to $23.

Crude prices went beyond $70 per barrel on hopes a stronger economy will lift demand.  Dollar prices continued to remain under pressure.  Although concerns linger over the state of the world economy, commodities have recorded sharp gains recently as investors have increasingly turned towards crude to hedge against a weak dollar.  Yesterday's $35 billion auction of 3-year Treasuries met with strong demand, however, as a yield of 1.96% topped expectations, and the bid-to-cover ratio equaled 2.8%. Today's calendar is for $19 billion in 10-year notes, with $11 billion 30-years slated for tomorrow.  However, investors remain concerned that rising short-term interest rates will squeeze banking industry's net interest margins, in a sector that has already seen a 73% price run-up over the past three months.

Meanwhile, late Tuesday, the Supreme Court rejected an appeal from three Indiana state funds, consumer groups and others, clearing the way for the sale of most of Chrysler’s assets to Italy’s Fiat Group SpA. 

Afternoon sentiment will reflect release of the Fed's latest take on regional economic conditions, revealed in its Beige Book at 2:00 AM ET. The report is likely to recount the well-aired areas of economic weakness, namely, depressed housing markets, soft consumer demand, deteriorating employment opportunities, and downward price pressures. Indications of an economic recovery's "green shoots" of growth may help boost sentiment.

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