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MV Weather Report: Keeping Powder Dry in Economic Storm


Rain or shine, we review the day's biggest stock stories.

After a brief morning sell-off, stocks staged a strong rally on news that mark-to-market accounting rules may be suspended - and that Treasury Secretary Tim Geithner will unveil a plan for the financials on Monday.

The news flipped the financials around; they led the upside move. Bank of America (BAC), JPMorgan (JPM) and Wells Fargo (WFC) all moved well off the lows for the day. Wells even filled the gap that Toddo had alluded to.

The rally was met with resistance at S&P 850 - a level that rejected that last few rallies. Today on the Buzz, Professor Cooper pointed out the significance of S&P 850-853:

"Our old friend S&P 853 is at it again. He just stuck his thumb in Hoofy's eye before he could snort over the Maginot Line.

"But, maybe it's better for Hoofy that the rubber band is pulled back prior to the economic data tomorrow morning."

The economic data Cooper is referring to here is the unemployment rate, which is due out tomorrow at 8:30 a.m. EST. Estimates have the unemployment rate coming in at 7.5%. I think it's safe to say this number will be extremely bad. The question now: How bad - and what's currently priced into the market?

As to that second question, it's difficult to say; here's Cooper's technical take: "An inverse right shoulder [could] get carved out on a dip into Friday morning, wouldn't it? So save some powder if you're looking for a rally, just in case there's a wiggle in the works."

Today, it did seem that traders wanted to go home with some dry powder: The S&P closed off the day's highs. Either way, all eyes will be on tomorrow's jobs number. As Mr. Practical likes to say, "risk remains high."

Speaking of Mr. Practical, he had a great post on the Buzz this morning.

"For those of you who haven't read Atlas Shrugged, there is a mini version of it in today's Wall Street Journal describing Ken Lewis' saga of buying Merrill Lynch and the government's role. Government always begins acting in naive good faith, but over time winds up acting in fear of reprisal.

"Economics cannot be managed from the top down by bureaucrats. It is about production from companies, regulated yes, but free to fail and thus free to seek more efficient production.

"Those blaming the free market for the bursting of the credit bubble still do not understand government's role in allowing and fostering it to be created in the first place: Mr. Greenspan's continued lowering of margin requirements at banks and supplying the fuel for the bubble to exist in conjunction with Mr. Geithner's lack of backbone in enforcing proper capital constraints on money center banks in the creation of off-balance sheet liabilities, the role of the GSEs in encouraging banks to make riskier and riskier loans, and finally Mr. Bernanke's and Mr. Paulson's faith in a lower currency as not the problem in the first place, but the solution.

All in the name of economic progress."

Have a great night, Minyans!
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