insto - Australian financial markets

Investors stayed on the sidelines as energy, technology and financial stocks edged downwards and the Dow Jones Industrial Average finished a streak of positive results 46 point down for the day at 10216. The S&P 500 Index fell 0.6 per cent, while the Nasdaq was off 0.4 per cent.

Among the corporate movers and shakers, tech stocks took the headlines, after Hewlett-Packard said it would buy 3Com. Chipmaker Intel announced it had settled an anti-trust dispute with rival AMD, although US regulators were reportedly less than impressed.

The S&P500 shed almost 1 per cent on the day, as Q209 drew to a close. The stock index has posted its strongest quarterly gain (15 per cent) in 11 years as markets seek to recover.

US Banks were lower following a government report that delinquencies on prime mortgages had increased to 2.9 per cent in Q109 from 1.1 per cent in Q108 while the broader market was weaker on news that US consumer confidence had unexpectedly declined.

US housing remained the focus of the market as weak housing starts data drove US stocks indices moderately lower and bonds higher.

The S&P500 index fell 0.2 per cent while US two year bonds yields were up 4 per cent, after construction of US homes fell to its lowest ever level in April. 

Investor fear is reducing as credit markets thaw. The VIX volatility index closed below 30 for the first time since September 2008.

The US stock market rally resumed overnight despite an increase in jobless claims. The S&P500 gained 1.04 per cent;  over 10 per cent of the stocks in the index have more than doubled since 9 March.

Credit indices underperformed equities. The US CDX investment grade index was unchanged 156.

US Treasury yields were also unchanged, while bank dollar funding costs declined to new lows.

US and European stocks declined overnight as US data reminded investors of the challenging economic environment.

US retail sales fell by a more than expected 0.4 per cent as unemployment, falling house prices and a loss of wealth pared back spending.

The US S&P500 stock index shed 2.7 per cent while Treasury bonds made further gains; the 10yr yield declined 7 points.

Stock and credit indices were moderately weaker overnight but offshore primary bond market activity remains strong.
 
While the Dow Jones  industrial index ended positive to reflect blue chip stock gains, the broader S&P500 declined by 0.1 per cent.
 
Energy sector stocks climbed as oil futures touched US$60 a barrel.

Credit was wider: The US CDX investment grade index pushed out 3 basis points to 152.

Markets softened overnight as investors sold into a rally that many feel has been overdone. Weaker conditions did not discourage corporate bond markets as a flood of new issues, including a debut offer from AAA rated Microsoft, were sold to eager investors.

Bank stocks, which had fueled a rise in stock indices dragged the market down. The S&P500 index shed 2.2 per cent as financial stocks were 5.8 per cent lower. Credit markets were a touch weaker; The US CDX investment grade index pushed out a point to 145.

Credit and equity markets continued to surge ahead as investors digested the bank stress test results and absorbed the latest US jobs data.

On Friday, the US CDX investment grade index was about 3 points tighter at 143, while financials led US stock indices yet higher. The S&P500 gained a further 1.6 per cent to finish 5.1 per cent higher for the week.

A further sign of investor confidence was a 9.2 per cent decline in the VIX volatility index to 32, well down from its October 2008 high of 80.

The bank stress test results are finally out. The total amount of capital required among 10 banks is US$75 billion.

Bank of America needs US$33.9 billion, Wells Fargo US$13.7b, GMAC US$11.5b and Citi US$5.5b, Regions Financial US$2.5b, SunTrust US$2.2b, KeyCorp US$1.8b and Morgan Stanley US$1.8b.

JP Morgan, Goldman Sachs, American Express, BB&T, State Street, MetLife, Bank of New York Mellon, US Bancorp and Capital One Financial. don't need to raise additional capital.

A number of banks have scheduled conference calls after hours in the US to discuss the results.