stress test

Markets can fall of their own weight, even as they look for a reason to rally. This one was doing just that on Monday when Nobel Prize- winning Princeton University economist Paul Krugman predicted that the U.S. economy will probably emerge from recession by September. The market woke up from its lethargic trance and rallied sharply on the comments, recouping the morning’s losses.

The recent government stress tests were made laughable last week as the US unemployment rate hit a recession high of 9.4%. This unemployment data was released Friday, June 5th, less than a month after the government completed the stress tests of 19 major financial companies.

The new homes sales numbers came in slightly lower than expected, but once again, the revision to last month was shocking. This again shows that any number we get will be revised much lower next month. It brings to the forefront the issue of any data the government is giving us.

The rally seems to have been a two part rally. One with volume and one without. When looking at the chart of the S&P 500 from March 6th, the bottom, to April 2nd, volume was very heavy. Since then, volume has been almost nonexistent. In fact, volume has continued to get lighter over the last couple weeks.

As investors welcomed the less-than-feared stress-test results and their hopes for an early economic recovery mounted, they drove up the prices of risky assets such as equities, oil and commodities, precious metals, emerging-market bonds and currencies, and high-yielding corporate bonds.

The Federal Reserve is schedule to release the results of the bank ‘stress test’ next week as the Obama Administration aims to restore financial stability in the world’s largest economy however, as the International Monetary Fund forecasts global write-downs budding from the worst financial crisis since the Great Depression to exceed $4 trillion in 2010, uncertainties emerging from the outco

“Goodbye safe havens, hello risky assets.” This was the refrain of investors’ theme song during the past week. Safe-haven assets were out of favor as better-than-feared corporate earnings and signs of a budding economic recovery emboldened investors’ appetite for reflation trades such as equities and commodities.

Investors’ mood was influenced last week by the stress test debate, tentative signs of economic stabilization in a number of countries and a barrage of earnings report – generally better than feared. As the equity rally ground to a halt on some bourses, the US dollar and government bonds offered little safety appeal and edged weaker.

The Stress Test results will be released to the banks today only. They will hear whether they pass/fail and how it was all calculated. Wall Street and the commoner will only hear how the tests were done, what rules were used to test these banks today. This is supposed to come out at 2pm ET. Some of the big worries Wall Street has is whether or not any banks will fail.

Spring is in the air – at least in the Northern Hemisphere and on global bourses. Last week marked the sixth consecutive up-week for stock markets as investors’ risk appetite returned amid signs of global economies and the financial sector embarking on the road to recovery.

It isn’t like we have gone through enough stress last year, now we need to worry if our Bank will pass the Govt’s stress tests. For the last 2 months 200 federal examiners have worked/audited the nation’s biggest banks to determine how these banks would hold up if the recession deepened.