And Bank of America arbitrarily assigned a higher value to its Merrill Lynch assets. Earnings reports this quarter may also impress investors. Trade revenue is up on the big spread between treasury and other bonds. And the banks earned fees in May helping each other raise capital.

Needless to say, when the number of jobs lost every month is in excess of 600k, we aren’t going to see an abrupt stop. We will unfortunately set the record for consecutive months of job losses in the next few months.

Monday

Economic Reports: Pending Home Sales

The Pending Home Sales report for March comes out this morning at 10:00 am, and I am a little surprised by the expectations (flat). With all the foreclosures continuing, and prices still sliding, I think this report will show a modest increase in Pending Home Sales.

Earnings Announcements: S

Tuesday

Economic Reports: ISM Services

This could be another month of contraction in the services sector if expectations are accurate. One thing to note when the report is released is if any sectors are expanding versus contracting. Last month the only sector to display expansion was in real estate rental and leasing. In any event, until more sectors are expanding than contracting the economy will continue to languish.

Earnings Announcements: KFT, UBS

Wednesday

Earnings Announcements: CSCO

Thursday

Earnings Announcements: GM, VRSN

Friday

Economic Reports: Non-Farm Payrolls, Unemployment Rate

Earnings Announcements: TM

Source:Employment Numbers Are About To Get Historically Bad

Bank of America Corp. (BAC), which reports today (Monday), remains among the last financials of note that has yet to announce its first-quarter performance, and the big bank figures to get a lot of attention as investors look to see how well Merrill Lynch & Co. Inc. (formerly known as “The Bull”) and Countrywide Financial Corp. have fit into the BofA family fold.

International Business Machines Corp. (IBM) (today) and Apple Inc. (AAPL) (Wednesday) will give investors a better idea of just how well the tech sector – which up to now has been quite hot – is really doing. Amazon.com Inc. (AMZN) (Thursday) will give investors an inside look at the health of the retail sector – especially the online variety.

Coca-Cola Inc. (KO), which reports tomorrow (Tuesday) and McDonalds Corp. (MCD) (Wednesday) should help us see whether consumers are so gassed that they can  even afford dollar sodas and burgers (or are buying more in lieu of dining at more-expensive restaurants).

Several economic reports will be worth a look, too. Home sales data for March highlight the economic calendar and analysts are eager to see whether February’s enhanced activity was the start of a trend or just an anomaly.  Interest rates are down; home prices are low, first-time buyers have tax incentives to buy.  Could the February and March numbers represent the start (continuation) of a housing rebound?  It’s going to happen at some point, and don’t forget that housing expert Andrew Waite, the publisher of the Personal Real Estate Investor magazine, recently told Money Morning that the recovery is already under way.

Market Matters

Strike up the band; let the good times roll; banks are making money again (or not losing quite as much). Earnings season moved along and financials led the charge with (somewhat) favorable reports.  Both Goldman Sachs Group Inc. (GS) and JP Morgan-Chase & Co. Inc. (JPM) announced better-than-expected quarters and key execs insisted they will pay back those TARP (Troubled Asset Relief Plan) dollars sooner than later.  While Goldman appears set to raise funds through a new stock offering (which will dilute current shareholders), JP Morgan insisted no similar issuance will be necessary.  With its $1.5 billion profit, Citigroup Inc. (C) looked quite promising relative to its $5 billion shortfall a year ago.  Still, some analysts claim the recent results reek of income-statement “shINTCenanigans” (and unsustainable bond trading gains), which is why they say that they will await the results of the independent stress tests in a few weeks, figuring that these  results will paint a more accurate picture of these banks’ operations.

Turning to techs, Intel Corp. (INTC) and Google Inc. (GOOG) reported stronger-than-anticipated quarters, but with caveats.  Despite claiming that the ailing computer industry may be “bottoming,” Intel refused to offer an outlook for the current quarter.  Google, on the other hand, enjoyed net-income growth, although the company experienced a decline in revenue (from the fourth-quarter 2008) for the first time in it five-year history as a public company.  While cell phone giant Nokia Inc. (ADR: NOK) suffered a drop in earnings, management reported optimistic signs of greater stability in the industry.  Conglomerate General Electric Co. (GE) posted a 35% decline in earnings, but still beat the Street outlook.  Airlines did not fare quite as well as both American Airlines parent AMR Corp. (AMR) and Southwest Airlines Co. (LUV) posted troubling losses, and warned of more turbulence to come.

In non-earnings news, The Procter & Gamble Co. (PG) bucked the recent cost-cutting trend and announced a dividend increase.  Mall owner General Growth Properties Inc. (GGP) filed for the biggest bankruptcy-protection case in the history of the real estate industry as the Chicago-based company attempts to restructure its debt positions, a move that underscores the concerns Money Morning recently raised as part of an investigation into the looming problems in the commercial real estate sector.

International Business Machines Corp. (IBM) moved beyond new Sun Microsystems Inc. (JAVA) overtures, claiming a reluctance to be drawn into a long antitrust battle.  Despite that failed deal, the boardrooms appear a bit more active these days as transactions highlighted the business news of the week.

American International Group Inc. (AIG) is selling its personal auto insurance line to Zurich Financial Services (OTC ADR: ZFSVY) for slightly less than $2 billion, the first of many such moves for the bailed-out insurer.

Express-Scripts Inc. (ESRX) will acquire WellPoint Inc. (WLP) for $4.68 billion to better compete with industry leader Medco Health Solutions Inc. (MHS) in the pharmaceutical-benefits-management space.

Rosetta Stone Inc., a language-education specialist, underwent an initial public stock offering (IPO) that reminded some of the “Go-Go” dot-com days as its stock soared about 40% on the first day of trading, the most successful offering in a year.

After five straight weeks of positive stock returns, U.S. stock experienced an early-week pullback, before charging ahead on the financials’ earnings reports.  “Six weeks and counting” have investors surmising that the rise may actually be more than a short-lived bear market rally (though the Nasdaq Composite Index remains the only key index in positive territory for the year).

Economically Speaking

Perhaps taking advice from spin-doctors, both U.S. President Barack Obama and Federal Reserve Chairman Ben S. Bernanke last week put a more optimistic (though realistic) face on the current state of the economy.

Said Bernanke: “Today’s economic conditions are difficult, but the foundations of our economy are strong, and we face no problems that cannot be overcome with insight, patience, and persistence.”

Said President Obama: “By no means are we out of the woods just yet, but from where we stand, for the very first time, we are beginning to see glimmers of hope.”

Additionally, the Fed Beige Book reported an ongoing contraction throughout the country, but implied that certain regions “saw signs that activity in some sectors was stabilizing at a low level”

President Obama also welcomed Cuba back into the global economy (to a limited degree) by lifting trade restrictions (telecommunications-related) and allowing increased travel and additional financial payments from Cuban-Americans to family members.

A hectic week on the economic calendar brought some mixed – and confusing – results, as usual. After a few stronger months of consumer activity, retailers struggled again in March as sales took a surprising tumble across most categories. Industrial production fell for the fifth straight month, revealing that manufacturers have a long way to go before declaring recovery.

On the other hand, while housing starts declined in March, the losses were attributed to apartment construction, and single-family residential activity was reported flat (similar to February); some optimistic analysts – like magazine publisher Waite – predicted the worst had ended for the housing sector.

Both the retail and wholesale inflation gauges dropped in March with the consumer price index (CPI) experiencing its first consecutive 12-month decline in prices since mid-1955.  While some pessimists in the bunch were quick to play the deflation card again, most seemed content to proclaim that price pressures are simply one aspect of the economy that warrants little to no worry in the present environment.

Weekly Economic Calendar

Source: Earnings Reports Will Play a Key Role This Week

The forces of the universe are pulling against one another. Tomorrow at noon, the nation will gain a leader that has inspired hope in millions of Americans. Economically, Obama’s stimulus plan is viewed as the last chance to keep the nation’s economy from retreating to a full-on depression.

I will be watching closely to see if Obama’s 6-foot-1-inch body shrinks at the exact moment he places his left hand on the bible as the weight of numerous global crises is piled on his back. It will take one heck of a leadership team to get us out of this financial mess. We had better hope Obama is as good as his campaign (and the mainstream media) says he is.

With the huge events in Washington this week, Wall Street is going to be devoid of attention. With numerous major companies expected to release quarterly earnings this week, that may be the best news we heard in a while. Any widespread bad news could send the equities market plunging once again. It may be best if the results stay quiet.

What to watch

Some key items to watch this week will be crude prices, the dollar and, of course, those pesky earnings reports. The crude markets are in for a wild ride as reserves across the nation begin to fill to maximum capacity. With demand down and suppliers hoarding their oil until prices rise, we are quickly running out of room to store the energy. If supplies are not significantly reduced in the very near future, crude prices could plunge below the $30 mark. It may happen this week.

With central banks cutting interest rates and news that England is putting several billion more pounds into its banking industry, the currency markets are likely to be busy over the next few days. That means the dollar, which has strengthened recently, could make even more gains. That is good news for a country that imports just about everything it needs.

Finally, with Blue Chips like Johnson & Johnson (NYSE:JNJ) and International Business Machines (NYSE:IBM) releasing their latest results tomorrow, all eyes will be on the lookout for major surprises. We got just a glimpse of the horrific potential this earnings season possesses last week. It caused share prices to plummet across the board. Traders will be hard-pressed to take the markets drastically lower without the news of a financial Armageddon, but if it is going to happen, it will happen this week.

Some plays worth taking a look at are Johnson and Johnson and the gold market. If JNJ releases earnings of better than $0.93 per share, expect a sizeable surge, making call options a worthy investment. Even if the company misses expectations by a penny or two, do not expect a wild swing to the downside, especially after giving up a few dollars in share price last week.

With the dollar in play and investors starting to look for safety outside the less-than-lucrative Treasury market, gold is getting plenty of attention. The precious metal gave back some of its recent gains last week, but showed signs of life late in the week. If earnings season turns sour, expect a bullish run.

This is going to be a news-filled and hectic week. Investors will have more than enough to digest. Smart traders will understand the news, conceive a strategy and profit as the nation jukes and jives through this critical period.

It will be an interesting few days.

Source: The news will dominate Wall Street this week

This from Investor’s Daily Edge:

Now that the election is over instead of focusing on what is going to happen over the next 10 weeks until the inauguration, I thought it would serve our readers better to look further out.  Over the next 10 weeks there are going to be numerous news items that will affect the market.  Traders will analyze each cabinet nomination, especially the selection of Treasury Secretary.  There are two more employment reports due out before the inauguration, the holiday shopping season, and the next earnings cycle will start before January 20.

Right now, everyone wants to know how President Obama is going to turn the economy around.  First, it isn’t going to happen overnight.  We aren’t going to go to bed on January 20 and wake up on January 21 and magically the economy is fixed.  And this would have been the same had McCain won.

One thing that might change somewhat overnight is we could see a boost in consumer confidence.  With things looking so dire, a change in leadership certainly couldn’t hurt right now.  Kind of like when a sports team makes a coaching change in the middle of the season.  All of the sudden the team goes on a winning streak with the same players.  When leadership is changed, there is an attitude change.  We better hope this is the case for the American economy.

In order for the economy to turn the corner and start improving, one of the big three has to start improving.  I am not talking about General Motos (NYSE:GM), Ford (NYSE:F) and Chrysler.  I am talking about the other big three.

What are the other big three?

As children, most of us dreamed of having three things when we thought about growing up: a nice house, a nice car, and a nice job.  These are the other big three.  Right now, these big three for most people are about as optimistic as the outlook for the automotive big three.

Over the past year, home values have dropped sharply, auto sales have dropped like a rock, and unemployment has gone through the roof.  Before the U.S. economy can turn around, at least one of these markets is going to have to turn higher.

After the October payroll numbers were released, it isn’t looking likely the job market is going to be the one that turns around anytime soon.  Adding the 240,000 jobs lost in October to the rest of the year, the number of jobs lost so far this year has reached 1.2 million.

Turning our attention to auto sales, the picture is much the same.  October’s numbers are the worst since 1992.  You might recall this was during the ‘91-’92 recession.  Vehicle sales have been falling for over three years now after peaking in the third quarter of 2005.

Much has been written in IDE as well as other publications about the trouble of The Big Three.  Without a doubt the U.S. automakers have serious problems, but as you can see in the chart, import sales are declining as well.

The third of the other big three, housing, may have the best shot at turning around first.

Source: The Economy Won’t Turn The Corner Until The Other Big Three Turn The Corner

— The Great Greenspan Reputation Rehab tour is officially under way.

“I was praised for things I didn’t do,” Greenspan said this morning in The Wall Street Journal. “I am now being blamed for things that I didn’t do.” Not that he spoke up when Bob Woodward hailed him as the “Maestro” …or when Time magazine featured him on its cover as the head of the “Committee to Save the World,” of course.

— Yesterday, we noted fiery comments Greenspan directed at critics in the Financial Times. Today, The Wall Street Journal trots out the results of not one, not two but three recent interviews.

The Maestro’s Last Defense: Look deep into his eyes. When his hand closes into a fist, 18 years of easy money policies will vanish from your memory. Poof!

“Omniscience is not given to us,” Greenspan told the WSJ, dodging one bullet. “There is no way to predict how innovative markets will develop. All you can do is set a general strategy. The choice is between a lightly or tightly regulated economy. The former is highly competitive, innovative and dynamic — but periodically visited by wrenching crises. The latter is more stable, but slower growing.”

“Monetary policy is process based on probabilities,” he continued, dodging another, “I don’t remember a case when the process by which the decision making at the Federal Reserve failed. Events often did not proceed as we anticipated, but that resulted from a lack of foresight, not from a flawed decision making process.”

Nearly 300 years ago, John Law, a Scottish gambler and womanizer, conducted the first modern experiment with paper money in early 18th-century France. While the party raged, Law became the richest man in the world and was hailed a hero by king and court. Before it was all over, Law barely escaped France with his life after having his carriage smashed by an angry mob. We recounted the story in Financial Reckoning Day in 2002, at the height of Greenspan’s Maestro-ness.

The fabulous destiny of Alan Greenspan awaits…we’ll keep you posted.

— Likewise, the sunny optimism breaking over Wall Street — thanks to the Washington Mutual rescue plan — turned cloudy yesterday. Traders are getting jittery about first-quarter earnings announcements.

Perhaps, rightfully so.

Alcoa, the first Dow component to report, did so yesterday after the close. It came in at 44 cents per share… analysts were expecting 48. But we don’t expect the aluminum producer will have much of an effect. Most of the financials begin reporting next week. That’s when the fireworks will begin.

For the day yesterday, the Dow and S&P each lost a skosh. The Nasdaq dropped about a quarter percent…down 0.26% Otherwise, trading was quiet.

— We’re detecting a theme in much of the day’s news. Something you might call “Peak Everything.” Oil, food, water — you name it — supplies are falling and prices and tensions are rising. The world appears to be entering one of those phases in history that will take generations of library-sequestered historians inventing new theories to explain.

— But let’s dive in, starting with oil. It’s approaching record levels again. Light, sweet crude closed up nearly $3 yesterday, at $109.09. One reason for the rise: a decline in production from Russia — the world’s second biggest oil exporter.

“Production has been flat the last three months,” explains our Byron King, citing an obscure report from oil analyst Aram Mäkivierikko, “and it’s still below the maximum of under 10 million barrels per day set last October. That’s putting a strain on global supply, despite what OPEC ministers say.”

In a worst-case scenario, the study says, Russian production has already peaked. And even in the best-case scenario, production can’t increase by more than 5-10%. Should this report bear scrutiny, the implication of “Peak Oil” in Russia will be dramatic.

On the home front, Byron’s keeping his eye on a company that claims it can transform used tires into fuel…and it’s going into commercial service no later than May 31. Down the road, the same technology could be used to breathe new life into American oil wells that have been abandoned for decades.

And it has a one-of-a-kind leg up on all competing technologies when it comes to extracting oil shale — the hard-to-extract stuff in the Rocky Mountains that’s estimated to total three times Saudi Arabia’s proven reserves. We’ve reserved details for paying members of Byron’s Energy and Scarcity Investor — on sale this week. If you’re interested in learning more, you can do so here for a limited time.

— Just days after Robert Zoellick, president of the World Bank, warned 33 countries are at risk of riots because of food prices — the risk is already becoming a reality in several of them.

Four people have been killed in Haiti, where the prices of rice, beans and fruit have risen 50% in the past year.

Food riots were reported in four West African nations yesterday, and a nationwide strike was called for today in a fifth. Plans for a general strike in Egypt to protest rising food prices have been squelched, but only because police arrested more than 200 people.

“I think what we are facing is a perfect storm,” comments Bettina Leuscher from the World Food Program. “More and more people are going hungry and need food aid. At the same time, we’ve got the lowest food reserves in some 30 years on the markets. And prices have gone up tremendously, sometimes doubled in the last few months and you’ve got climate change with less harvest, droughts, floods.”

No riots in New York — not yet, anyway — but food pantries report major shortages because donations are way down.

– “We need to be concerned,” U.N. Secretary-General Ban Ki-moon commented yesterday, “about the possibility of taking land or replacing arable land because of these biofuels.” This, two years after the United Nations Food and Agriculture Organization forecast that biofuels would wipe out hunger and poverty for up to 2 billion people.

“I’ve heard from at least a dozen farmers,” counters Kevin Kerr, who has been on the biofuel beat for years, “in Illinois, Minnesota, Iowa, Wisconsin and Indiana. They’re all telling me the same stories of either ethanol plants under construction that have ceased operations or plants that are declaring Chapter 11. Looks like the ‘dream’ of the new gold rush in corn-based ethanol is starting to unravel, and fast.”

— How about the outlook for U.S. crops this spring? Says Kevin: “Not great.”

“The wet, muddy conditions and continued rain make it next to impossible to get equipment in the fields,” Kerr writes. “Also, farmers run the risk of putting seeds in too early and, basically, losing the crop. The situation is pretty grave this year, as demand for all the grains is very high, as are the costs to plant them. The hope seems to be that we will have another year like last year and Mother Nature will be kind. It may not end up that way.”

Kevin heads out next week for his annual trip to the upper Midwest. “I knew corn would be going to $6 three years ago largely because of what I found out by visiting farms and seeing what was going on long before the ethanol boom landed on the front page of Barron’s.” We’ll keep you posted on Kevin’s travels.

Oh…some angry farmers respond to our coverage of the ethanol boom, too, below.