Wednesday, June 10, 2009

Market Reflections 6/9/2009

Ten banks said they are paying back the TARP funds that helped keep many of them afloat during the worst of last year's credit panic, headlining an otherwise steady session that was anything but quiet. The recent surge in interest rates is raising talk whether the government should cut short its massive stimulus program, redirecting nearly $800 billion in unspent stimulus funds to pay down the deficit. There's talk that should the recovery take hold and stimulus efforts are not reversed, inflation will be the result -- a risk that explains strong and rising inflows into commodities.

Oil toyed with $70 through the session while copper jumped 5 percent on the day. Continued increases in commodity prices will hurt the recovery and raise the risk of an inflation-induced recession. Investors are on the look out for any troubles at this week's Treasury auctions, trouble that would indicate investors are no longer comfortable with dollar-based fixed income instruments. But there's absolutely no sign of that yet as today's giant $35 billion 3-year note auction found very strong demand. The dollar did fall back in the session but in a reversal of yesterday's gains, ending down 1.3 percent at 79.82 on the dollar index. Stocks were little changed with the S&P 500 up 0.4 percent at just over 940.

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