Stocks opened flat on Wednesday as investors weighed a tame inflation reading against a drop in mortgage applications and weaker-than-expected outlook from FedEx. Consumer prices rose just 0.1 percent in May, despite the rise in gasoline prices, after a flat reading in April. Over the past 12 months, prices have fallen by 1.3 percent, the most since 1950, the Labor Department reported. Read and listen to what the experts had to say…
‘Bumpy’ Recovery Ahead
“A bumpy recovery is probably the most likely scenario,” said Yvan Mamalet of Societe Generale Asset Management. He said that while there is an ongoing recovery, “in order to sustain a 'V-shaped' recovery, the economy would need to see sharp rises in consumer spending and investment in late 2009 and early 2010.”
Road to Recovery Will Be Slow
The road to recovery for the economy and the markets “will be a slow slog,”says Stuart Schweitzer, global markets strategist of JPMorgan Private Bank. “We still have the same consumer debt burden,” he said. “The only growth that we’re getting is the growth from companies that have to restart production lines.”
- Art Cashin: Expect 'Long, Tough' Slog
Market Correction Began in Early May
The correction actually began in early May and everything has flipped since May 6th, said Peter Canelo of Argus Institutional Partners. “The defensive stocks except telecom stocks have done better and all of the economically sensitive stocks have come down a bit led by financials, this is only going to make it a bit difficult for financials.” He expects better numbers in the summer months.
A New Reserve Currency?
Emmanuel Ng of OCBC Bank said BRIC communiqué did not mention the dollar or another reserve currency. “At the very least, there were no dollar-bashing comments,” he said. “So in the near term, the weakness of the dollar will be alleviated to a certain extent.” In the case of a new reserve currency, the most visible candidate would be the SDR, he said.
Investment Banking ‘Playing Field’ to Change
Morgan Stanley and Goldman Sachs are each expected to pay back $10 billion to the TARP fund today. Joe Biernat of European Credit Management said the move will “change the investment banking playing field entirely” as companies who have paid back TARP will have "a much freer reign in managing their businesses."
Will Increased Financial Regulation Work?
“We’re going to have a plethora of regulators in the U.S. and from my own experience…that doesn’t really work particularly well,”said Alastair Newton of Nomura. “I think [Obama’s] going to be in for a lot of trench warfare on the hill in any case and I don’t think the Americans are going to move forward as quickly as the Europeans.”
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