July 9, 2009 (FinancialWire) (By Philip Holmes) — Stocks ended mixed on Wednesday as investors began to realize that they’ve been getting ahead of themselves, and that maybe recovery isn’t really around the corner. OK, maybe that’s going too far, but we did hear that Washington is talking about another round of stimulus.

We also heard that firms–including BlackRock (NYSE: BLK), AllianceBernstein (NYSE AB)–are being enlisted to help clean up the books of U.S. banks. Remember that plan?

The Dow Jones industrial average rose 14.81 points on the trading day, to close at 8,178.41. The Standard & Poor’s 500-stock index lost 1.47 points to close at 879.56, while the Nasdaq composite index gained 1.00 points, to 1,747.17.

It wasn’t as close as the final results would indicate: late-session buying prevented the major indices from ending lower and the overall sentiment among investors is anything but confident.

Alcoa, the first big hitter of the Q2 earnings season, said it lost $312 million, or $0.32 per share, from continuing operations over the quarter. That’s better than the aluminum maker’s $480 million, or $0.59 per share, loss in the first quarter. After accounting for restructuring charges the loss drops to only $256 million. Revenues are up due to lower raw material prices.

Did the Obama Administration underestimate the depth of the recession? It did, if you follow BusinessWeek’s report of Obama adviser Laura Tyson’s remarks during a speech in Singapore. She said that the stimulus passed in February was too small, and that more is needed.

She’s not alone in this opinion. Paul Krugman has been saying much the same thing in the NY Times since before the stimulus package was finalized. Recent “Green Shoots” froth was starting to make Paul sound like a Goth chick from the 90s on a particularly bad day, but the Nobel committee is feeling vindicated today.

As BW reports, “The argument for more stimulus is simple: American consumers have abruptly switched from spending to saving in an effort to fix their sorry-looking household balance sheets. While that’s healthy in the long run, in the short run it’s disastrous for people who work for a living and need people to buy their goods and services.”

We could add that all those millions of jobs lost–more than in any other recent recession, including the early 80s–cause consumers to pull back whether they want to or not. Which leads companies to lay off more workers. Which-you get it. It’s a death-spiral toward deflation unless something is done.

Of course, there are those who maintain that nothing should be done. Japan did OK in the end. Well, after 15 years of stagnation and running internal deficits that make the U.S. look stingy.

Remember how the Obama team was going to appoint a Dream Team to help sort out all the toxic waste being carried on the books of the nation’s banks? The team has been chosen, according to CNNMoney’s David Ellis, and it includes BlackRock, AllianceBernstein, Oaktree Capital Management, Invesco, Angelo, Gordon & Co., Marathon Asset Management, RLJ Western Asset Management, The TCW Group and Wellington Management Co.

The firms, which were chosen from among 100 applicants, have the task of raising half a billion dollars in 12 weeks from private investors eager to profit from those so-called toxic assets, which are really misunderstood and undervalued legacy assets, according to Treasury Chief Tim Geithner.

As Ellis reports, “The government will run auctions between the banks selling assets and investors buying them, hoping to effectively create a market. The goal is to help cleanse the balance sheets of many of the nation’s largest banks and help get credit flowing again.”

Of course, the fate of the enterprise hinges on whether those assets really are undervalued. Otherwise, the $30 billion of taxpayer funds used to prime the pump on the program will have gone to waste.

The Investrend Economics Calendar lists Chain Store Sales for June, Weekly Initial Jobless Claims (8:30 a.m.), Wholesale Inventories for May (10 a.m.), Treasury auctions 30-year bonds (1 p.m.).

The Investrend Events Calendar showcases CTX Shareholders Meeting; SMSC Analyst Day Meeting; XTNT Shareholders Meeting.

The Investrend Money Index is an indicator of the depth of market direction or indirection. While not always including the same stocks, the NYSE/NASDAQ 50 Most Actives indicate the direction in which the mass of money is flowing. Last session’s trading showed 18 advancers versus 31 decliners and one unchanged. Advancers were led by Amgen Inc. (NASDAQ: AMGN) up 13.92%, Msc.Software Corporation (NASDAQ: MSCS) up 10.96%, Dryships Inc. (NASDAQ: DRYS) up 6.12%. Decliners followed Yrc Worldwide, Inc. (NASDAQ: YRCW) down 28.23%, Genworth Financial (NYSE: GNW) down 12.21%, Cell Therapeutics, Inc. (NASDAQ: CTIC) down 9.59%, Huntington Bancshares Incorpora (NASDAQ: HBAN) down 9.33%.

Investrend Website of the Day: http://www.new7wonders.com

Quote of the Day: “I’d give Charles Darwin videotapes of ‘Geraldo,’ ‘Beavis and Butt-head’ and ‘The McLaughlin Group.’ I would be interested in seeing if he still believes in evolution.” Dean R. Koontz

Today is: Independence Day in Argentina, Constitution Day in Palau.

Happy Birthday: Nikola Tesla, Elias Howe, Edward Heath, Ed Ames, Vince Edwards, Lee Hazlewood, Donald Rumsfeld, Brian Dennehy, Richard Roundtree, Dean R. Koontz, John Tesh, Tom Hanks, Kelly McGillis, Courtney Love, Fred Savage.

Today in History: Henry VIII of England annulled his marriage to his fourth wife, Anne of Cleves, in 1540. British troops and colonial militiamen were ambushed in 1755, suffering a devastating defeat by French and Native American forces. In Versailles in 1789, the National Assembly reconstituted itself as the National Constituent Assembly and began preparations for a French constitution. Napoleon annexed the kingdom of Holland as part of the First French Empire in 1810. President Zachary Taylor died in 1850 and Millard Fillmore became the 13th President of the United States. An unsuccessful expedition led by E.D Young set out in 1867 to search for Dr David Livingstone (Scottish Missionary and explorer). Queen Victoria gave royal assent to an act creating the Commonwealth of Australia in 1900, thus uniting separate colonies on the continent under one federal government. In the great train wreck of 1918: In Nashville, Tennessee, an inbound local train collided with an outbound express killing 101 and injuring 171 people, making it the deadliest rail accident in United States history. Johnny Weissmuller swam the 100 meters freestyle in 58.6 seconds in 1922, breaking a world swimming record and the “minute barrier.”

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