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Investors Face a Week of Whipsaws: Dave's Daily

NEW YORK ( ETF Digest) -- Stocks didn't like earnings news and economic data overall. In the eurozone, Spain sold some 10 year debt (mostly to Spanish banks and perhaps the ECB) at levels below 6% but only to see prices fall and yields rise in the secondary market. Equity indices in the eurozone were markedly weaker. Polling in France shows Sarkozy no doubt losing to the socialists which would mean austerity agreements would go out the window.

Earnings reports focused primarily on Morgan Stanley (MS) and Bank of America (BAC). Frankly, one would need a forensic financial archeologist to wade through the release to find the "real deal" from each company. The standout category had to do with both company's DVA (Debt Value Adjustments). Both companies bonds are being revalued lower. As a book entry trick the company's may then deduct the loss in value of their own debt against earnings. MS after all is facing a three notch downgrade from Moody's as I understand it. After all these deductions were counted both companies could then report slightly positive earnings in lieu of losses: BAC $25 (stock slightly lower by 1.60%) and MS $.71 (stock higher by 2.25%).

Economic data released Thursday began with Jobless Claims (388K vs expected 365K and prior revised higher to 386K from 380K) which allowed for another beat, however the overall trend is heading south. Existing Home Sales (4.4M vs 4.62M expected and prior 4.59M) was a mild disappointment but completed the week unimpressively for all housing data. The important Philly Fed Survey (8.5 vs 12 expected and prior 12.5) was a disappointment as well reflecting an ongoing economic slowdown. Lastly Leading Economic Indicators (.3% vs .3% expected and prior .7%) also confirmed slack economic conditions.

U.S. stocks gave up most of the week's gains and now it's up to bulls to launch a Friday "stick save" to close the week positively. A positive word here or there from Bernanke of more not less stimulus could stampede the herd certainly. Let's not forget another Fed meeting next week.

The name of the game with earnings is to beat much lowered estimates and in late trading we see this with reduced earnings that beat with Microsoft (MSFT) and Advanced Micro Devices (AMD).

Gold (GLD) and the dollar (UUP) were relatively flat as investors there continue to scratch their heads over future direction. Overall commodity markets (DBC) and oil (USO) were also mostly flat. Bonds (IEF) were once again the winner on the day given falling stock markets.

Volume was sharply higher than the previously this week. It is also common to see higher volume on sell days. Breadth per the WSJ was negative.

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