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 Government Action Might Finally WorkThe U.S. government is now going toe-to-toe with the financial collapse. It is issuing stimulus packages to taxpayers. It is modifying home mortgage terms to keep homeowners at home. It is directly lending into the commercial paper markets and extending financial support through low-cost capital and equity infusions to the most precarious financial institutions. It is organizing G-20 meetings to formulate global solutions. And maybe, most importantly, it is reining in the out-of-control credit-derivatives market. It has made an implicit promise to fight this fight until the end, no matter how much capital is required. |
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
