U.S. Stocks Retreat, Snapping Six-Day Advance for S&P 500

A six day gain in the S&P 500 has been snapped. This decline has been led by a decrease in the stock prices of energy, financial and technology companies. The initial gain was the result of news of rise in home prices and increase in consumer confidence. However, as the dollar appreciated thereafter, its inverse relation with stocks prevailed. This allowed market watchers to observe a seventh day loss in the S&P 500.

Treasury Yield Curve Steepens to Record Amid Growth Outlook

US Treasury yield curve has steepened to record levels reflecting sentiments of the recovery of economic growth in the country. Economists are of the opinion that economic growth has returned and inflationary pressures are now a concern.

Funding of the purchase of US Treasuries will be a problem. With the US government trying to lower its current account deficit, other nations will not have enough US dollars on hand to purchase US Treasuries. The Americans will have to fund these Treasury sales internally.

According to the break even rate reflected by TIPS, the expected inflation rate is at 2.32%, up 9 basis points from last year.

Geithner Says TARP Repayments Don’t Hurt Bank Lending Ability

Banks that have received financial assistance from the US government's TARP scheme have been in a rush to sever all ties with the government to free themselves from the executive compensation restrictions imposed. These institutions have been doing this by drawing in private capital to replace government capital. This recapitalization exercise would not adversely affect their ability to lend to others. However, analysts have pointed out that private lending will not increase without any demand and collateral from private firms.

Citigroup's current capital raising program has hit a snag when it was forced to sell its shares at a price lower than expected, prompting the government to put the sale of its share on hold.

Initial Jobless Claims in U.S. Unexpectedly Increase

There has been an increase in first time jobless claims recently, counter to what economists have expected. This just goes to show that the recovery will not be smooth sailing. The road to recovery will be filled with treacherous obstacles.

Citigroup Says Abu Dhabi Seeks to End Share Purchase

Abu Dhabi Investment Authority (ADIA) is of the opinion that Citibank has misrepresented to them on the terms within the investment agreement they had with them. Right now, ADIA is required to purchase Citibank shares at 8 times its current market price based on the agreement. That equates to a share price of about $31.83 to $37.24. Naturally, ADIA is disappointed and has decided to sue Citibank.

It remains to be seen as to how far Citibank would be willing to subsidize ADIA's botched investment.

Abu Dhabi Bails Out Dubai World With $10 Billion

The Abu Dhabi government has finally decided to bail out Dubai World with $10 billion. This move has caused the stock markets there to soar as what has been determined implicitly has crystallize at last. This sum of money given to Dubai World would provide the company with the leeway to restructure its debt.

Dubai Company Bonds Dive as Swaps Show Default Risk

The ripple effects from the debt restructuring of Dubai World can be felt throughout Dubai with the series of credit downgrades being initiated by the various rating agencies.

Many analysts believed that the Dubai government would guarantee the debts of the those state-owned companies. Now they realize that this is not the case which has resulted in a series of credit downgrades. The ownership structure of these companies is very complex and it would take some time before analysts figure out which companies are actually government guaranteed and which are not.

Gold Can’t Beat Checking Accounts 30 Years After Peak

Many asset classes beat the returns obtained from gold. History as also taught us that gold is not a great hedge against inflation. This asset class also does not deserve a very significant weight-age within an investment portfolio.

NBER’s Hall Says Recession May Be Over

NBER (National Bureau of Economic Research) believes that the recession is over. This is determined from the fact that payrolls have been decreasing at a lesser amount than predicted by many. This coupled with the fact that unemployment rates have declined to 10 percent goes to show that the recession may be over.

Pimco Says Bet on Yuan After Dubai Reminds of Risks

Yuan has been appreciating steadily over the previous years. This has been achieved by the effective government policy of disallowing the yuan to appreciate in the short-term so as to allow the economy to recover.

Once the recovery of the economy has been achieved, the yuan will become a market-based currency. This is so as the Chinese central bankers know that under a flexible exchange rate, the China's growth will shift its focus to domestic demand, allow resources to be allocated more efficiently and reduce the risks of asset bubbles.