- Commentary -

August 11, 2009 (FinancialWire) (By Philip Holmes) — Stocks ended lower on Monday as investors awaited the word from the Fed on whether open market policy will reflect predictions from some quarters that the recession is near an end. Mortage funder Freddie Mac (NYSE: FRE) is reporting a net income of $768 million for Q2, but remains cautious about its near-term outlook. Turnaround or bailout bounce?

The Dow Jones industrial average closed at 9,337.95, down 32.12 points, while the Standard & Poor’s 500-stock index shed 3.38 points to end the trading session at 1,007.10. The Nasdaq composite index dropped 8.01 points to end at 1,992.24.

Friday’s encouraging jobs report only went so far to bolster investors, as many took profits in anticipation of the Federal Reserve” wrap-up release following its two-day open market committee meeting, which starts Tuesday.

Will the Fed declare an end to hard times? Not according to most experts. In specific terms, the policy makers are expected to leave the benchmark Fed funds target interest rate near zero. We can also expect vague language on any pullback on open market operations.

But if the Fed keeps pumping money into the economy there is an increased risk of inflation if indeed the recovery is underway in force.

The last part, “in force,” is the tricky part. Economists generally agree that there has been an easing of the dark forces of recession, but they disagree on the strength of recovery.

Lucia Mutikani of Reuters reports that according to around 90% of the economists polled for the most recent The Blue Chip Economic Indicators survey, the recession will be declared to have ended this quarter.

However, “Debate now centers on the speed, strength and durability of the recovery,” according to the survey report. Two-thirds of respondents anticipated a U-shaped recovery, with stronger growth waiting until the second half of 2010.

But around 17 percent of the respondents saw a V-shaped recovery underway, with a strong move to previous rates of growth. The same number of respondents worried about a W-shaped recovery, with a strong bounce followed by further downturn, followed by a more lasting recovery.

Where do you place your bets? With caution, apparently. Freddie Mac saw its Q2 net income rise to $768 million after posting a dismal $9.9 billion net loss in the first quarter. But the mortgage funder warned investors not to get to giddy: foreclosures and unemployment are still on the rise, credit markets remain tight and home buyers remain skittish.

The FirstAlert(tm) Economics Calendar lists Productivity Index for Q2 (8:30 a.m.), Weekly Chain Store Sales (8:55 a.m.), Wholesale Sales & Inventories for June (10 a.m.), Treasury auctions 3-year notes bills (1 p.m.).

The FirstAlert(tm) Events Calendar showcases APD, BEZ at Jefferies & Co. Industrial CEO Summit; AUTH, COGT, DGLY at Morgan Keegan Security, Safety & Defense Conference; CAT, NAV at Credit Suisse Group E2M2 Conference; CML, ELX, ATHR, COMS at CanaccordAdams Global Growth Conference; PETD, UNT, PTEN, XTO at EnerCom Incorporated Oil & Gas Conference; PFWD, MFE, NVDA, NETL at Pacific Crest Securities Technology Leadership Forum; QLGC, EMC, FFIV, TLAB at Morgan Keegan “Summer in the City” Technology Conference; VZ, CSCO, CNQR, MSFT at Oppenheimer & Co. Communications, Technology & Internet Conference.

FirstAlert(tm) “Money Index” is an indicator of the depth of market direction or indirection. While not always including the same stocks, the NYSE/NASDAQ/AMEX 25 Most Actives and NYSE/NASDAQ/AMEX greatest Percentage Losers and Percentage Winners (weighted against pure monetary loss/gain) indicate the direction in which the mass of money is flowing, as well as the general focus of the market. Of the Most Actives, last session’s trading showed 13 advancers versus 12 decliners. Volume leaders were led by Citigroup, Inc. (NYSE: C) trading 113,422,300 shares closing at $3.94 (up 2.3%), Freddie Mac (NYSE: FRE) trading 33,784,200 shares closing at $1.69 (up 128.4%) and Bank of America Corporation (NYSE: BAC) trading 32,230,200 shares closing at $16.68 (up 1.6%). Of last session’s Greatest Percentage Losers, stocks taking the greatest monetary losses were led by Barclays PLC (NYSE: BCS) trading on volume of 18,900 shares (losing $5,800.5 million), Lloyds Banking Group PLC (NYSE: LYG) trading on volume of 443,900 shares (losing $2,931.8 million) and Ocwen Financial Corp. (NYSE: OCN) trading on volume of 524,500 shares (losing $205.1 million). Of last session’s Greatest Percentage Winners, stocks making the greatest monetary gains were led by Radio One Inc (NASDAQ: ROIAK) trading on volume of 57,353 shares (gaining $14.8 million), Management Network Group Inc. (NASDAQ: TMNG) trading on volume of 315,692 shares (gaining $7.8 million) and Corus Bankshares Inc. (CORS:NASDAQ: CORS) trading on volume of 1,239,411 shares (gaining $3.9 million).

The statistical source for deriving each day’s The FirstAlert(tm) Money Index is StockSmart.com (http://www.stocksmart.com/ri/mostactive.staticdoc).

FirstAlert(tm) Website of the Day: http://web.baseballhalloffame.org/index.jsp

Quote of the Day: “Better sleep with a sober cannibal than a drunken Christian.” Herman Melville

Today is: Presidential Joke Day

Happy Birthday: Anna Maria Luisa de’ Medici, Philip Phillips, Alex Haley, Mike Douglas, Arlene Dahl, Jerry Falwell, Hulk Hogan, Joe Rogan.

Today in History: Persians under Xerxes in 480 BC defeated the Spartans, who fought to the last man under King Leonidas, in the Battle of Thermopylae. Babe Ruth became the first baseball player to hit 500 home runs in his career with a home run in 1929 at League Park in Cleveland, Ohio. John Lennon apologized in 1966 for stating that the Beatles were “more popular than Jesus.” Alan Greenspan became chairman of the United States Federal Reserve in 1987.

[FirstAlert(tm) was created by Gayle Essary, founder of Investrend Communications, Inc., parent of Investrend Information. The opinions expressed in FirstAlert(tm) do not necessarily reflect the opinions of Investrend.]

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