No matter what our government says about the true health of bank balance sheets, the real stress test for the U.S. stock market lies in what happens next to the BKX. I have a feeling the major averages will start following the banks should they continue moving lower, but who really knows? The safest prediction I can make is that the S&P 500 won’t be hanging around 850 much longer.

Employment will make or break this depression. Today, it’s not looking so good. 12.5 million Americans are out of work, and counting. Here’s the quick and dirty on the rest of the employment numbers this morning:

• The economy shed 651,000 jobs in February, right in line with Wall Street’s expectations. That’s the 14th month in a row of net job losses
• January and December jobs losses were revised down heavily. January was bumped down another 57,000 jobs, to a 655,000 loss. And the BLS altered Decembers by more than 100,000, to a 59-year high of 681,000 lost jobs. (Proof that these guys either put the numbers wherever they want, or that they aren’t very good at keeping track)
• Thus, over 4.4 million jobs have been lost since the official beginning of the downturn in late 2007.

The “official” unemployment rate is up to 8.1%, thanks to those revisions — a 25-year high. And you know that if the government is willing to cop to that number… it’s really much worse.

At the same time, over 7.8% of all U.S. mortgages are now delinquent, the Mortgage Bankers Association reports today. That’s the highest since at least 1972, when the MBA started keeping track. 3.3% of U.S. mortgages are in foreclosure, also a record.

The stock market is taking the news in stride… so far. Dow futures perked up about 50 points after the jobs number, and managed to open this morning up by nearly the same amount.

Then again, traders might just be taking a break from relentless selling. Major indexes were slammed yesterday. Most fell over 4%. There was the usual gloom, but traders got particularly depressed after China failed to go the way of I.O.U.S.A. and pump an extra trillion bucks into its struggling economy.

“The whole world now turns its weary eyes,” recounts Bill Bonner, “not to that bastion of free-market leadership, the United States of America, but to a country that has only had a quasi-free market in goods and services for less than a quarter century… a country still run by Maoists. It is to them that we supposedly look to save the world economy!”

The Dow’s 4% yesterday brings this year’s losses to 25%, just a bear’s hot breath away from the 33% slump the Dow suffered through all of 2008. The old lady finished closed the day at 6,594, a fresh 12-year low… and right in line with our initial forecast.

From its peak, that’s a 53% decline. As much as the media have worn out the phrase “The worst since the Great Depression” now it’s true:

Even before yesterday’s close, we were looking at the worst 41-day open in over 100 years.

In the Dow’s history, the closest to our own downer year was 1920, which registered a 14% decline. We’re in uncharted territory.

“In 1933,” Chris Mayer comments, “the Dow finished up 66% for the year! With all the similarities between now and the 1930s, let’s hope we see that kind of rally. It would be our last chance to sell down to some core positions that we’d be willing to hang onto through the march through the desert — should we follow form with the rest of the 1930s with a Great Depression 2.0.”

SPECIAL ANNOUNCEMENT: As you can see, we’ve been digging deep looking for what’s worked in other eras. Mr. Mayer does such a fine job with that kind of key research, we’re gearing up to launch a brand-new weekly service with him at the helm. It’s tentatively called the Crisis Recovery Report and yes, we’re thinking about sending it out… free… for as long as this unraveling crisis demands. That is, until we’ve reached the other side of this mess — if there is indeed another side.

We’ll let you know the details as they come. We haven’t even set up an official web presence for the report yet… but if you want to get on the early list for the announcement, send your request to: crisisrecovery@gmail.com

There’s was only one new high on the entire NYSE today: Sturm, Ruger… they make guns. The stock is up 71% so far this year and is at a 52-week high. Smith & Wesson is up 75% this year, too.

As confidence left the market yesterday, traders turned to gold. The spot price jumped about $30 from Thursday’s low, now at around $940 an ounce.

Oil managed to avoid the madness yesterday, too. The front-month contract took a brief dive during the session, but quickly returned to credit crisis highs just below $45 a barrel.

Even the mighty dollar couldn’t withstand the swell of selling pressure yesterday. After hitting three-year highs of nearly 90 this week, the dollar index has backed down to 88.3.

“A strange thing is happening in the currencies,” notes Chuck Butler. “While currency investors have had to live with this trading theme that rewards the dollar with every deep, dark, dangerous data report, this time it appears to be different. The dollar is getting sold on all corners overnight… traders looked at the size of the forecast for job losses and ran for the hills.

“The euro is leading the way higher, with a huge gain overnight… As I walked out the door yesterday afternoon, the euro was barely holding onto the 1.25 handle… When I woke up this morning with a wine glass in my hand — what wine, whose wine, where the hell did I dine? The euro was 1.2675! And we all know what happens when the BIG DOG gets off the porch to chase the dollar down the street… all the little dogs get to chase the dollar too!

“And Japanese yen was one of the best performers, which tells me that the risk takers were back!

“So… Is this a change in the trading theme? Well, one overnight rally doesn’t lend itself to a convincing argument of such. But it certainly points out that the dollar is vulnerable at the margins, and once we get back to fundamentals… watch out!”

In Washington, a whole new $500 billion legislation is in the works. Congresspeople are pushing through legislation this week that would allow the FDIC to borrow up to $500 from Uncle Sam’s coffer over the next two years. The FDIC’s war chest to rescue failed banks shrank from $52 billion to $19 billion in 2008. Chairwoman Sheila Bair recently said that fund “could become insolvent this year.” Thus — naturally — the House is moving to increase the FDIC’s fund more than 10-fold.

“Within six years,” Chris Mayer also writes, ending today’s issue with a megatrend worth your attention, “New York will no longer be among the world’s five largest cities. The new top five? Tokyo is No. 1, with a population (35 million) greater than all of Canada. Then follows Mumbai, Sao Paulo, Delhi… and Dhaka. Dhaka? Yes, Dhaka. It’s the capital of Bangladesh.

“‘All cities are cities of the moment,’ says Richard Wurman, the celebrated American architect. He is right. No city stays on top for long. In the year 1000, the most populous city in the world was Cordova, Spain. Beijing was tops in 1500 and 1800. London was the biggest in 1900, New York the biggest in 1950. Today, Tokyo.

“The pace of urbanization is particularly swift in China and India. More than 25 million people move to cities each year (see the chart below).

“Some of the numbers are hard to fathom. As U.S. Global Investors points out in a recent presentation, China will add more people in 15 years than the entire population of the United States. ‘There will be up to 50,000 new skyscrapers,’ the company notes, ‘the equivalent of building 10 New Yorks. There could be up to 170 new mass transit systems. There are only about 70 in Europe today.’

“This massive population shift has enormous effects on infrastructure spending. Trillions of dollars will have to go toward building power systems, roads, water and wastewater systems, ports and more. It’s like what the U.S. went through in the early 20th century — only on a much more massive scale… these changes will create enormous opportunities for investors that a previous generation could barely imagine.”

“Are you really as simple-minded as your slanted editorializing infers?” asks a reader. “In slamming Sen. Harry Reid for his opposition to the nuclear waste dump at Yucca Mountain and suggesting he’s only interested in spending ‘trillions’ for energy independence, you overlook the most basic requirement for gaining, then retaining, elected office: Make your constituents’ best interests your own. As a citizen of Nevada, specifically Summerlin, I can assure you that most of us who live within 100 miles of Yucca Mountain have made it crystal clear to the senator that we oppose this location as a depository for the nation’s nuclear waste.”

“Personally, I would favor a location about halfway between Baltimore and D.C. Would that be all right with you? We could save those trillions you believe the Democrats want to spend on ‘energy independence.’ (I assume you put the term in quotes so readers would understand that you sneer at the very concept of such self-reliance.)

“Your condescending right-wing babbling may find a ready audience among many readers of The 5, but certainly not all. I wouldn’t find your bias so objectionable if you had even a modicum of Bill Bonner’s charm and wit. Alas, if you haven’t found a way to express yourself as winningly as Mr. Bonner does by this point in your career, I’m certain it will never happen.

“Oh, by the way, I’m sure you find Sen. John Ensign — the current holder of the most conservative voting record in Congress — much more to your liking. Surely, he must get how important it is to dump the country’s radioactive waste on a deserted place like Nevada.

“Sorry to be the one to shatter your dream — Ensign can also read a poll, apparently. He, too, is opposed to opening Yucca Mountain to the nation’s nuclear poison. Heh.”

The 5: Wow… we give in. You caught us.

You did a masterful job at seeing right through our attempt to inform you about a coming investment opportunity in thorium and related companies. Alas, it was just a thinly veiled shot at Sen. Reid and the truly ridiculous concept of “energy independence.” Why on Earth would we want to be self-reliant? In fact, the only purpose of The 5 — hell, all of Agora Financial — is to undermine confidence in legislation, prop up foreign oil companies and promote right-wing agendas.

Phew, it feels great to get that of our chests. What a heavy burden it’s been… all these years. We had to write three books and make a full-length documentary on what a disaster Republican control of Congress and the White House was just to provide adequate cover. But now… you’ve exposed us. We thank you…we can finally end this ridiculous charade. Bring back the neocons! Get Rush on the phone!

We love your idea, by the way, about dumping nuclear refuse between Baltimore and DC. A little toxic waste would actually improve the place.

The national debt might hit the $11 trillion mark over the weekend. Hope you can still enjoy it.

Source:Jobs Rundown, Market Records, Coming Megatrend, a Special Announcement and More!

U.S. stock index futures fell on Thursday, pressured by a weak earnings season and worries that the $825 billion economic stimulus package could still face a bumpy road.

Shares of widely held Dow component Exxon Mobil were down 2.1 percent at $77.55 before the opening bell after Goldman Sachs removed the company from its Americas Buy list, saying it saw better investment opportunities among energy companies.

The U.S. House of Representatives passed President Barack Obama’s stimulus package late on Wednesday but despite the new president’s goal of bipartisanship, every Republican who voted opposed the bill. The Senate begins debate next week.

“It’s clear the Republicans don’t want to play ball with the Democrats, they want to do it their way,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

“Any slowdown in the stimulus package is not going to be good. The market wants to see this passed, done, signed, in the bank and let’s move on to the next problem.

Investors were also watching for initial weekly jobless claims, due at 8.30 a.m. (1330 GMT). Worries over mounting job losses have been in the forefront this week as more companies have announced massive cuts as they attempt to stay afloat.

S&P 500 futures fell 9.20 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were down 79 points, and Nasdaq 100 futures lost 4.75 points.

A gain in Ford Motor Co helped futures trim losses after the ailing automaker posted a loss but saw a lower cash burn rate than expected and reaffirmed it plans to go ahead without government loans. Ford was up 6.9 percent at $2.17.

Starbucks Corp (SBUX) was the latest company to say it will slash jobs when it reported lower quarterly profit after the bell on Wednesday as sales fell globally. The coffee chain’s shares were down 3.6 percent at $9.30.

Stocks rose on Wednesday as financial stocks soared on optimism the Obama administration was making progress on a plan to relieve banks of money-losing assets.

The Wall Street Journal reported on Thursday that government officials looking to revamp the financial bailout have discussed spending another $1 trillion to $2 trillion.

With Wednesday’s advance, the benchmark S&P 500 capped its fourth straight day of gains, its longest run-up in two months. Year to date, the benchmark S&P 500 is down 3.2 percent, a marked improvement from a 6.4 percent loss seen at Tuesday’s close. After starting 2009 up more than 20 percent from its Nov. 21 bear market low, the S&P is up 16.2 percent from that significant low.

NEW YORK, Jan 29 (Reuters)

Wall Street was poised for a lower open on Tuesday as investors fretted over grim earnings and the health of the banking sector, highlighting difficulties facing U.S. President-elect Barack Obama.

Optimism over a plan by Obama, who will be sworn in later on Tuesday, to push for a fresh stimulus package to stave off a worsening economy could help cushion the market.

But the banking sector could weigh heavily, taking a cue from global markets after Britain’s Royal Bank of Scotland on Monday posted the biggest loss in U.K. corporate history, even as Britain launched a second bank rescue plan.

Banks have been at the epicenter of the credit crunch and resulting economic slowdown that has spread around the world. Among laggards before the bell were Citigroup , which was down 4.9 percent at $3.33, while Bank of America lost 10.9 percent to $6.40.

“As excited as we are about the change in (the U.S.) administration and the history that we’re making in this country and what fiscal stimulus might look like, we’re also, unfortunately, realistically taking a good hard look at the earnings power of corporate America,” said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.

“If last week was any early indication, it won’t be a very attractive earnings reporting season.”

S&P 500 futures fell 13.40 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were down 93 points, and Nasdaq 100 futures lost 9.50 points.

Shares of State Street Corp dove 35.2 percent to $23.56 before the opening bell after the financial services company posted rising unrealized losses in its commercial paper program and investment portfolio, as well as lower fourth quarter profit.

Dow component Johnson & Johnson fell 2 percent to $56.30 after the company posted a rise in fourth-quarter profit even though its sales fell nearly 5 percent.

Energy companies could also come under pressure as the price of oil slid below $34 a barrel after a deal between Russia and Ukraine cleared the way for the resumption of gas supplies to Europe. Shares of Exxon Mobil were down 2.7 percent at $76 in pre-market trading, while Chevron fell 1 percent to $71.02.

In the auto sector, Italy’s Fiat took a 35 percent stake in Chrysler as part of a venture designed to secure the U.S. automaker’s future. The fate of the ailing sector has weighed on Wall Street, as a failure of one or more of the Big Three Detroit car makers would likely have repercussions throughout the economy.

Shares of Intel could weigh on the Nasdaq after a report that the world’s largest chip maker has cut the price of some processors by as much as 48 percent. Intel was off 1.2 percent to $13.57.

NEW YORK, Jan 20 (Reuters)

U.S. stocks were set for a mixed open on Wednesday, which ends one of Wall Street’s worst years and raises hopes that a new year and fresh policy initiatives will stave off a deepening recession.

The Federal Reserve on Tuesday pushed forward with its effort to drive down mortgage costs, setting a target of buying $500 billion in mortgage-backed securities by mid-2009.

The move could bolster optimism as investors have been heartened by signs that the Fed is fighting aggressively to cushion the downturn, including dropping interest rates to near zero.

“Things haven’t improved but at least the Fed has stopped things from appreciably worsening,” said Barry Ritholtz, chief market strategist at Fusion IQ in New York.

“Clearly most investors this year were not prepared for what happened and I think there’s a sigh of relief from those that were blindsided that the year is finally over.”

The number of workers filing new claims for jobless benefits fell much more than expected to 492,000, but seasonal factors likely contributed to the drop and the labor market remains very soft.

S&P 500 futures rose 3.40 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed 14 points, while Nasdaq 100 futures were off 3.25 points.

The broad S&P 500 looks set to end 2008 down about 40 percent for the year, though it has recovered almost 18 percent since hitting an 11-year low on Nov. 20.

Markets around the world have been pummeled as the collapse of the U.S. housing market evolved into a global credit crunch and economic slowdown which infected everything from financials to automakers to retailers.

The U.S. casualties include the bankruptcy, acquisition or government takeover of such household names as Bear Stearns, American International Group , Washington Mutual, Merrill Lynch and Lehman Brothers.

AIG, which was rescued by the government soon after the collapse of Lehman, is prepared to ask the Federal Reserve to relax rules on its more than $60 billion disposals program to allow bidders to use a greater proportion of shares to pay for its assets, the Financial Times reported.

On the housing front, demand for U.S. mortgage applications was unchanged during the Christmas holiday week, holding the highest levels in more than five years with loan rates near record lows, an industry group said on Wednesday.

Bernard Madoff, alleged to have run a decades-long $50 billion Ponzi scheme, faces a Wednesday deadline to tell regulators how much he is worth and where his money and other assets are.

The Madoff scandal, which came to light earlier this month, has added to already negative sentiment in the markets. Scores of wealthy people, banks, universities and charities around the world say they are victims, but so far the exact amount of money lost is not known in what could be the largest fraud in Wall Street history.

On Tuesday, stocks climbed after the government expanded its bailout of the auto industry, encouraging hopes policy-makers will continue to take steps to minimize the severity of the year-long recession.

NEW YORK, Dec 31 (Reuters)

At the New York close on Friday, the blue-chip Dow Jones Industrial Average Index had plunged 312.62 points (-3.6%), to trade at 8,378.63. The tech-laden Nasdaq Composite Index shed 51.88 points (-3.23%), to reach 1,562.03. And the broader Standard & Poor’s 500 Index dropped 31.45 points (-3.46%), to hit 876.66.

“It’s a bear market on steroids,” David King, a money manager at Putnam Investments, who helps manage about $137 billion, told Bloomberg Television. “It’s very accelerated by the pace of financial markets today.”

Prior to the New York opening bell, pre-market traded futures for all three major U.S. indices fell their maximum allowed daily limit, causing safety measures to kick in and halt futures trading until the market’s open. Dow futures crashed 550 points, or 6.27%, to 8,224. The S&P 500’s futures index plunged 60 points, or 6.56%, to 855.20, and Nasdaq futures skidded 85 points, or 6.20%, to 1,175.75.

But despite the bleak picture futures painted, the U.S. markets recovered from the day’s deeper lows to close higher than originally indicated.

Commodities tumbled on fears of demand destruction from weak economic growth. Gold traded down to $681.00 an ounce from an opening level of $713.30. Oil also declined despite production cuts from the Organization of Petroleum Exporting Countries (OPEC). [For a related story in Money Morning on OPEC’s production cut, please click here.]

“Selling is across all asset classes,” Robin Bhar, a commodities analyst at Calyon in London, told Bloomberg News. “A month ago we were on the edge of a cliff and now we’re in freefall.”

In overseas markets, Japan’s Nikkei Index had an 811.90-point decline to close at 7,649.08, its lowest level in over five years. Hong Kong’s blue-chip Hang Seng Index plummeted 1,142.11 points to close at 12,618.40, its lowest level since August 2004.

“The market is pretty desperate and at a loss. Four days running of big losses, though the turnover is quite low,” Howard Gorges, vice chairman South China Securities, told Reuters, speaking of the Hong Kong markets. The Hang Seng Index has dropped 55% so far this year.

“People are just standing aside. These are dangerous markets to play around with. That’s the main reason for getting into cash,” Gorges said.

In Europe, major indices sunk on news that the United Kingdom’s gross domestic product contracted more than expected with a decline of 0.5% in the third quarter.

“We are obviously not sure exactly how this whole situation will develop. We’ve had some quite deep and severe recessions in the UK before, and hopefully we can avoid that sort of situation in the current circumstances, but the risks of that have increased,” Andrew Sentance, a member of the Bank of England’s rate-setting monetary policy committee, told BBC Radio Leeds.

The FTSEurofirst 300 Index of blue-chip European shares skidded 4.9% to close at 829.73 points, its lowest closing level since May 2003, Reuters reported.

The Paris-based CAC40, London’s FTSE 100, Madrid’s IBEX 35 and the Frankfurt-based DAX all posted triple-digit losses.

At the New York close, the dollar had gained ground against the euro [up 2.46%] and the pound sterling [up 2.02%], but lost ground against the yen [down 2.94%].

Source: Global Sell-Off Takes a Toll on U.S. Equities

U.S. stock futures pointed to another monumental beating on Friday – with leading contracts falling as much as rules allow — as a plunge in Asia reignited concerns about the health of the global economy.

S&P 500 futures dropped 60 points to 855.20 and Nasdaq 100 futures fell 85 points to 1,168.50. Dow industrial futures fell 550 points.

All three contracts fell so much that they reached pre-specified limits that can’t be broken until pit trading opens.

Thursday’s session for U.S. stocks was erratic but generally positive, with the Dow Jones Industrial Average closing 172 points higher and the S&P 500 rising 11 points, though the Nasdaq Composite slipped 11 points.

Read on at MarketWatch.