- US Markets Bracing for Selloff On Worries About Dubai's Debt
- Wednesday's Economic News Crunch Could Tilt Markets
- Tuesday's Heavy Dose of Data to Dictate 'Risk' Behavior
- Thanksgiving Week Stuffed With Economic News
- Double-Dip Jitters Cast Pall on Stocks; Techs to Weaken
- Gold Rush to Prevail on Demand, Low Rates, Weak Dollar
- Citi Strategist Bumps Target
- Rally's Low Volume Prompts Question: Whither Buyers?
- Stocks May Rise Further after Fed Waves on 'Risk Trade'
- Week Ahead: Investors Go for Quality, Assess Recovery
RSS FEED
MOST SHARED
- Kuoni CEO Sees Recovery in Travel Sector
- Gold Retreats from Record High as Dollar Rebounds
- Dubai Struggles to Ease Debt Fears; Investors Rattled
- Chinese Overcapacity is Worsening, EU Chamber Warns
- Wal-Mart Price Pressure Hurts China Workers: Report
- Fannie Mae to Tighten Lending Standards: Report
- Hyundai-Kia Targets Rapid China Growth in 2010
- China Unveils Carbon Target Ahead of Copenhagen
- The 'Real' Jobless Rate: 17.5% Of Workers Are Unemployed
- 4 Thanksgiving Week Buys For Your Portfolio: Market Pros
- There's a 'Great Chance' For a Double-Dip Recession: Strategist
- Revenge of the Gangsta Nerds
- Will TCU See The "Flutie Effect?"
- Retail Earnings and Sales to Improve in Q4: Analyst
- Consumers Catching the Holiday Spirit
- It's Beginning To Look A Lot More Riskless
- Crescenzi: Claims Level Suggests End to Job Losses
- Hedge Funds Take Early Lead in Warren Buffett's 'Big Bet'
- Dubai Struggles to Ease Debt Fears; Investors Rattled
- US Companies Already Moving on Curbing Emissions
- Fannie Mae to Tighten Lending Standards: Report
- Investing in Good Karma – and Making a Profit
- Retailers Should Believe in Christmas Miracles
- Wal-Mart Price Pressure Hurts China Workers: Report
- Bankruptcies Jump, Hitting Highest Level in Four Years
- Steepest Black Friday Discounts, Revealed
- Where Do Pardoned Turkeys Go?
Market Insider
Text Size 
There should be some answers Friday for a market that's been stressing about the government's stress tests.
Ford, 3M and Honeywell roll out earnings before the bell Friday, but a lot of the focus will be on what Treasury's stress test for banks looks like. (See more below quote box.)
In the early afternoon, the Treasury releases the details of how it is evaluating the 19 largest recipients of TARP (Troubled Asset Relief Program) funding. The tests have become the subject of intense discussion in the market, and news and rumors related to them have been highly market moving. There will be no information released on individual institutions until May 4 when the actual results will be made public. Banks though are expected to start receiving their reports Friday.
"You're going to have a hundred different analysts picking apart the minutiae of the details, and you're going to have a bull case and a bear case for each," said Pete McCorry, who trades bank stocks at Keefe Bruyette.
The stock market Thursday continued its quiet see-saw trade, and was up about 1 percent at the close, nearly the mirror opposite of Wednesday's finish. Stocks are basically flat for the past two sessions.
CNBC.com Slideshows:
- The World's 15 Biggest Debtor Nations
- The 15 Biggest Holders of US Government Debt
- America's Greenest Companies
Traders say the sideways action is not unexpected as the market struggles to set a course amid a barrage of earnings and other news. Many traders have been anticipating a sell off as the earnings season got underway but it hasn't come.
McCorry said the market's thin trading makes it susceptible to the kinds of moves it has had in the past two sessions. "It seems to me investors are grabbing at the positives," he said. "'Green shoots' is going to become part of the lexicon. Those are the type of things people are hearing. What they're ignoring are the several other comments, including the one from (Bank of American CEO Ken) Lewis that credit is deteriorating at a faster pace."
He also pointed to March's poor existing home sales number which had an immediately negative impact on stocks early in the day. The best performing stocks were financials Thursday, up about 4.5 percent. Of those, many of the credit card-related names did well. Capital One rose 17 percent. Executives from the biggest credit card companies met with President Obama Thursday afternoon, but traders said there were no surprises as the president chided the banks for ratcheting up rates and fees and other policies.
After the bell, American Express said its quarterly profits were down 56 percent to $437 million, as customers cut back on spending. American Express [AXP Loading... ()] increased its loss reserve by 49 percent. Its stock rose with other financials during the trading day but added as much as 6 percent after hours on better than expected revenues.
More From CNBC.com
- Get After-the-Bell Dow 30 Quotes
- Credit Spreads and Libor Data
- Futures and Pre-Market Data
- Currency Data
Microsoft [MSFT Loading... ()] also reported sharply lower profits, and its stock rose as well in late trading. Its profit of $2.98 billion or $0.39 per share was in line with estimates.
ITT [ITT Loading... ()], Schlumberger [SLB Loading... ()], T.Rowe Price [TROW Loading... ()] and Xerox [XRX Loading... ()] are also among the companies reporting earnings Friday. Key economic data due Friday includes durable goods, at 8:30 a.m. and new home sales, at 10 a.m.
In the Treasury market Thursday, bonds posted slight gains after the Fed was in the market. The 10-year's yield was headed toward 3 percent in early trading but as buying kicked in it slid to a level of 2.93 percent.
Stressing Over Stress Tests
Jeff Rosenberg, who heads global credit strategy research at Bank of America Merrill Lynch, said what's leaked out about the stress tests in news reports shows the Treasury test is no "wimpy" test, and those news leaks have helped lift some of the uncertainty.
"They're priming the market. They don't want a big rip off of the band aid surprise event. They want the market to have a good understanding of what to expect. I think we do know what Geithner has already said—that the vast majority of banks will pass the stress tests," he said.
Stocks sold off early in the week on worries the government would dilute bank shareholders by converting more preferred holdings to common stock. Geithner's comments Tuesday soothed those concerns. "The real message is that by making a statement of adequate capitalization, you reduce the risk of future equity dilution, and that's where the maintenance of value comes from. It's all about the fears of dilution," he said.
Rosenberg said if the Wall Street Journal's reports about the details of the tests are correct then his analysis shows the majority of banks are healthy. The Wall Street Journal reported that the government has made assumptions about the losses in mortgages, credit cards, commercial real estate and every other type of loan. For instance, the paper reported an assumption of 20 percent losses on credit cards and 11 percent on home equity loans.
- From 'Fast Money': The One Airline to Get on Your Radar"It's not just about the concentration of (the bank's) exposure though that historically is their number one variable. It makes no distinction for the asset quality. So, the questions is can the asset quality differentials outweigh the broader level of asset concentration?" he said.
"The source of the improvement is government guarantees. What would happen to credit markets if you removed government guarantees? The answer is we'd be right back into he thick of it, where we were in September and October," he said. "The entire short-term credit market is government guaranteed. There is virtually no risk being taken by private investors in the short-term credit markets."
"The most important positive message is government can be successful in ensuring stability. We are not going to have a collapse of our financial system. We are not going to have the collapse of the financial system that is a catalyst to Depression...There's a cost to choosing stability and stability is probably the right choice but the cost is it's a prolonged recovery," said Rosenberg.
Questions? Comments?
- For nearly three decades, these on-call experts have been dishing advice on how to – and not to – cook turkey.
- Ever wished your cab driver would stop nattering and just get to where you're going? Well that moment is near(er).
- Eric Schmidt pledges to create a virtual copy of the Iraq National Museum at Google’s expense.
- Bill Griffeth is taking a leave of absence from CNBC and Power Lunch for a year. Here's a message from Bill.
- More shoppers than ever plan to comparison-shop this season. Who will benefit?
- It may be the most unusual guide to business you'll read.
Data is a real-time snapshot *Data is delayed at least 15 minutes