Financial stocks (-0.4%) remain the only major sector in the S&P 500 to trade with a loss. Regional banks (-1.4%), diversified banks (-1.7%), and diversified financial services companies (-1.6%) are creating a considerable drag on the sector.
According to Dow Jones, an official from the FDIC indicated that additional assessments on banks are probable. Meanwhile, other reports indicate that the FDIC is seeking a one-time five basis point assessment on banks' total assets. Reuters reported that the FDIC expects $70 billion in losses to the FDIC's deposit insurance fund over the next five years.

The S&P 500 is trading up 0.62% at 893.86, on the high side of a 884.41 to 895.46 range. Last week, the index bottomed at 878.96 (saw a low of 879.59 Thursday also), before pressing to a high of 924.23 on Wednesday of this week. A break below 875.00, former resistance/now key support, would be viewed negatively, with steeper losses likely, traders say. Conversely, if it appears that stocks have bottomed yet again ahead of that key support zone, the case for a clear rejection of the downside can also be made, which may allow for a new leg higher in the index, they say.

The broader market continues to chop along in positive territory. However, selling pressure has intensified against General Motors (GM 1.46, -0.46) after CNBC reported that GM's bondholders have rejected the company's offer for a 10% equity stake. The stock is now at a session low, but it is still up 45% week-to-date.
Earlier reports indicated that GM has reached certain agreements with union representatives that are expected to be revealed in detail next week.

The major indices are back near their session highs after chopping lower in early afternoon trade. Though gains are rather modest, stocks are up more than 1% from their session low. Week-to-date, the stock market has gained 1.2%

The dollar declined beyond $1.40 against the euro for the first time since January on concern U.S. creditworthiness deteriorated and near-zero borrowing costs made the nation’s assets less attractive to investors.
The yen touched a nine-week high versus the dollar after Japan’s Finance Minister Kaoru Yosano said the government won’t intervene in the currency market and the Bank of Japan raised its economic assessment. The dollar headed for its biggest weekly drop versus the euro since March after Pacific Investment Management Co.’s Bill Gross said yesterday the U.S. will “eventually” lose its AAA credit rating.
The U.S. currency slumped 3.6 percent versus the euro this week, heading for the biggest loss since the five days ended March 20, when it tumbled 4.8 percent. The dollar lost 0.7 percent versus the yen this week as the euro gained 3.2 percent.
“The markets are beginning to anticipate the possibility” of a U.S. credit rating cut, said Gross, co-chief investment officer of Newport Beach, California-based Pimco, in an interview yesterday on Bloomberg Television. “It’s certainly nothing that’s going to happen overnight.”
The administration of President Barack Obama will sell a record $3.25 trillion of debt in the fiscal year ending Sept. 30, according to Goldman Sachs Group Inc.
Treasury Secretary Timothy Geithner said yesterday in an interview on Bloomberg TV that he’s committed to minimizing the federal budget deficit, targeting a reduction to 3 percent of gross domestic product or smaller, compared with a projected 12.9 percent this year.
“The urgency for money managers with large U.S. dollar holdings to diversify could well intensify,” analysts led by Callum Henderson, global head of currency strategy in Singapore at Standard Chartered Bank, wrote in a research note today. “The first considerations will likely be hard currencies that are liquid. On these counts, the likes of the euro, yen, Australian dollar and Canadian dollar will win out.”
Some Fed policy makers indicated at the April 28-29 policy meeting that the central bank might have to increase its purchase of assets should the economy or financial markets deteriorate further, minutes released this week showed.
The yen strengthened against the dollar as the Bank of Japan kept its target lending rate at 0.1 percent at the end of its policy meeting today and raised its economic assessment for the first time since July 2006. The central bank also said it will accept foreign debt owned by banks as collateral for loans.
Japan’s currency headed for a thirdly weekly gain versus the greenback after Finance Minister Yosano said the “government isn’t considering currency intervention at this point.” Waning global sales and a 10 percent gain in the yen versus the dollar in the past year hurt exporters including Toyota Motor Corp.

"We continue to expect that the Fed will take no actions to begin draining liquidity from the financial system until the second half of 2010 at the earliest. The Fed will want to make sure that the recovery that we expect to commence in the fourth quarter of this year will be sustained. It is unlikely to feel confident of this until early in the second half of 2010.

Stocks are paring some of their gains in what has become listless action. While the three headline indices are still in positive ground, the Nasdaq 100, S&P 400, and Russell 2000 have eased into negative territory to trade with fractional losses.
Treasuries are under relatively strong selling pressure for the second straight session. The benchmark 10-year Note is down 19 ticks, which has lifted its yield to a 2009 high of 3.44%.

"We reiterate our 1100 S&P 500 2009 yearend target,"says UBS Equity Strategist, David Bianco.

Stocks held modest gains Friday, following a choppy opening, as investors welcomed signs the U.S. economy is not in imminent danger of a credit downgrade.
Bonds slumped on supply concerns ahead of $101 billion in new issuance next week.
Shares of financial services companies were under pressure after BankUnited FSB went under Thursday, becoming the largest bank failure of the year.
Energy stocks held modest gains as oil prices slipped below $61 a barrel.
Sears Holdings Corp., parent company of retailers Sears and Kmart, reported earnings Thursday that beat analysts expectations and amended its credit facility to provide additional funding. Shares rose 16% Friday.
AIG chief Edward Liddy announced late Thursday that he plans to depart the company once the insurer's board of directors finds a replacement.
A consortium of private-equity firms acquired BankUnited FSB in Florida after the savings and loan was shut down by federal regulators Thursday. BankUnited was the 34th - and largest - bank to fail so far this year.
Autos: The U.S. government said Thursday it invested an additional $7.5 billion in GMAC, the main source of financing for General Motors customers, and the main lender for Chrysler.
Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 3.39% from 3.36% Thursday.
Oil for July delivery gained 20 cents a barrel to $61.25.
COMEX gold for June delivery rose $13.80 to settle at $951.20 an ounce.

European equity bourses are set to close higher Friday, having seen lackluster trade for most of the day, ahead of the holiday weekend. The benchmark indices retraced earlier gains following
the open of the US markets, but have now bounced a little, moving back into the black. Mining stocks are continuing to give support to the indices, helped by gains made in the metals markets, with Rio Tinto (RIO) and BHP Billiton (BLT) still leading. Oil stocks have also managed
to hold onto earlier gains, with BG Group (BG.) in London outperforming. Financials on the other hand have lost ground during the afternoon, weighing on the blue-chip indices, although BNP Paribas (BNP) is still offering support to the CAC.
FTSE +23.38 (+0.54%) at 4,368.85, CAC +15.08 (+0.47%) at 3,232.49, Dax +20.68 (+0.42%) at 4,921.35.

Despite a rather positive tone to premarket trading, stocks have come under pressure in the first few minutes of the session. Telecom (-1.1%) and tech (-1.0%) are showing the most weakness. Only utilities (+0.2%), consumer staples (+0.1%), and energy stocks (+0.3%) are sporting gains. Energy's advance comes in the face of lower crude oil prices, which were recently quoted 0.6% lower at $60.70 per barrel. Oil prices had been trading with solid gains ahead of pit trading.

"Traded like there were some $1.40 expiries, a trader says, noting prints at the level on the option cut. Partcipation has slowed a bit from the earlier, better level but euro remains bid and looks setfor a strong close on the week. Jan highs at $1.4055 a nearby target, the trader says, "but December levels around $1.45/1.46 can't be ruled out."

EUR/USD $1.3825, $1.3800, $1.3750, $1.3725, $1.3700
USD/JPY Y94.00, Y93.65, Y93.40/35, Y95.00, Y95.50
EUR/JPY Y132.60, Y134.00
AUD/USD $0.7700
USD/CAD C$1.1360, C$1.1400
AUD/NZD NZ$1.2700

U.S. stocks were poised to advance at the start of Friday's open, although trading could be volatile amid anxiety about the economy. At 7:01 a.m. ET, Dow Jones industrial average, S&P 500 and Nasdaq 100 futures were higher.Futures measure current index values against perceived future performance and offer an indication of how markets may open when trading begins in New York.Blue-chip stocks have pulled back for three days straight amid concerns about the economy. Wall Street tumbled Thursday after Standard & Poor's cut its outlook for the United Kingdom to "negative" from "stable," spurring worries that a similar downgrade could happen to the United States.
Those concerns pushed the dollar to its lowest level in five months against a basket of currencies on Friday.

- Mar retail sales ex-autos -0.2% m/m

Data released:
03:30 Japan BoJ meeting announcement 0.10% 0,10% 0,10%
05:00 Japan Leading indicators composite index (Mar) 76.3 76.6
05:00 Japan Coincident indicators composite index (Mar) 85.1 84.9
08:30 UK GDP (Q1) revised -1,9% -1,9% -1,9%
08:30 UK GDP (Q1) revised Y/Y -4,1% -4,1% -4,1%

The dollar declined to a more than four-month low against the euro and weakened versus the yen on speculation the U.S. may lose its AAA credit rating. The yen rose to a nine-week high versus the dollar after Japan’s Finance Minister Kaoru Yosano said the government won’t intervene in the currency market and the Bank of Japan raised its economic assessment. The dollar headed for its biggest weekly drop in two months versus the euro after Pacific Investment Management Co.’s Bill Gross said the U.S. will “eventually” lose its AAA credit rating. The pound rose in the week against the dollar even after Standard & Poor’s lowered its outlook for the U.K.’s top credit rating.
“The impact of a possible downgrade on the U.S. would be much greater than the one on the U.K. because the dollar still represents 60 percent of the global foreign reserves,” said Hidetoshi Honda, a currency strategist at Mizuho Corporate Bank Ltd. in London. “We’d expect massive outflow of dollars from foreign reserves so that is dragging the dollar lower.”
EUR/USD has tested the 13980 resistance again after rising around 40 pips in the last hour, but the pair has failed again to break it, and it has been rejected to 1.3950. Currently the pair is trading around 1.3945/55, 0.10% above today's opening price.EUR/USD has remained at levels above 1.3900 after yesterday's rally from levels around 1.3725. During European session, the Euro has remained above 1.3925 after hitting a fresh 4-month high at 1.3980.
Greg Holden, analyst at ForexYard, says that Dollar volatility set to impact FX Market today: "The U.S currency continued to slip against the EUR yesterday, dropping 1% to as low as 1.3950. It also dropped to its lowest this year against many of its other major currency pairs as worries about swelling U.S. deficits soured investor's appetites on U.S. assets"

USD/JPY falls to test 94.00 level

HFE economist Ian Shepherdson says 631k jobless claims are still high. If the recent hike was due to autos, the small dip "begs the question of why claims did not fall further, given that last week's jump was 38K. The uncomfortable suggestion must be that the underlying pace of claims is not slowing" - the pace of layoffs is not dropping sharply.

Hang Seng Index ends down 0.80% at 17,062.52 on Friday.

EUR/USD $1.3825, $1.3800, $1.3750, $1.3725, $1.3700
USD/JPY Y94.00, Y93.65, Y93.40/35, Y95.00, Y95.50
EUR/JPY Y132.60, Y134.00
AUD/USD $0.7700
USD/CAD C$1.1360, C$1.1400
AUD/NZD NZ$1.2700

London Gold morning fixing, as of May 22: $952.50
Spot gold continued to see more rangebound trade Friday, bouncing a little after the London, open and having seen the $955.15 - $950.28 range.
Despite a weaker dollar, the yellow metal is still lower however, with traders reporting some mild profit taking after yesterday's rally putting pressure on prices.

The yen rose to a nine-week high versus the dollar after Japan’s Finance Minister Kaoru Yosano said the government won’t intervene in the currency market and the Bank of Japan raised its economic assessment. The dollar headed for its biggest weekly drop in two months versus the euro after Standard & Poor’s yesterday cut its outlook on the U.K.’s AAA credit rating, and Pacific Investment Management Co.’s Bill Gross said the same will happen to the U.S. “eventually.” “The impact of a possible downgrade on the U.S. would be much greater than the one on the U.K. because the dollar still represents 60 percent of the global foreign reserves,” said Hidetoshi Honda, a currency strategist at Mizuho Corporate Bank Ltd. in London. “We’d expect massive outflow of dollars from foreign reserves so that is dragging the dollar lower.”
The pound traded at $1.5817, from $1.5844 yesterday, after earlier climbing to $1.5897, the highest since Nov. 6. The currency slumped as much as 1.5 percent yesterday after S&P lowered its rating outlook to “negative” from “stable,” and said the nation faces a one in three chance of a rating cut.

Resistance 3:Y96.70
Resistance 2: Y96.20
Resistance 1: Y95.00
Current price: Y94.12
Support 1: Y93.80
Support 2: Y92.60
Support 3: Y91.80
COMMENTS: The dollar continues to bargain in a range. Resistance comes near yesterday’s broken trend line from Jan 21 on Y95.00. Back above will point to further rise to Y96.20 (May 20 session high). Above the target comes at Y96.70 (May 13 and 19). Support is around session lows on Y93.80. Stronger level comes at Y92.50/60 (23.6% Fibo of Y110.70 - Y87.00 decline). Below losses extend to Y91.80.

Resistance 3:Chf1.1150
Resistance 2:Chf1.1050
Resistance 1:Chf1.0930
Current price: Chf 1.0893
Support 1:Chf1.0880
Support 2:Chf1.0760
Support 3: Chf1.0700
СOMMENTS: Resistance comes at session high on Chf1.0930. Stronger level – at Chf1.1050 (yesterday’s high). Above the target comes at channel line from Apr 22 on Chf1.1150. Support is located at Chf1.0860 (area of a session low and Jan 7, 8 and 9 lows). The important level – is around Chf1.0760 (trend support line from Mar 13’2008)/ Break under open the way to Chf1.0700.

Resistance 3:$1.6020
Resistance 2:$1.5960
Resistance 1:$1.5880
Current price: $1.5840
Support 1: $1.5750
Support 2: $1.5700
Support 3: $1.5510
COMMENTS: Cable bounced back after correction. Strong resistance comes at $1.5880 (session highs and channel top from Mar 19 and Apr 28 crossing). Break above will strengthen bullish momentum and bring the rate to $1.5960. Stronger resistance comes at $1.6020 (38.2% of $2.0150 - $1.3480 decline).
Support comes at $1.5750 (session low), stronger – on $1.5700 (50% of $1.5510 - $1.5880 rise). Key support is near yesterday’s lows on $1.5510.

Resistance 3: $1.4080
Resistance 2: $1.4000
Resistance 1: $1.3950
Current price: $1.3948
Support 1: $1.3880
Support 2: $1.3820
Support 3: $1.3720
COMMENTS: Tech hasn't changed. Support comes at session lows on $1.3880, stronger – at $1.3820 (61.8% of $1.3730-$1.3950 rise). Key support is near Thursday’s lows on $1.3720/30. Strong resistance comes at $1.3950 (channel line from Apr 28). Break above will target $1.4000 and $1.4080.

GBP/USD
Offers $1.5840, $1.5860, $1.5890/00

EUR/USD
Offers $1.3970
Bids $1.3910/00

USD/JPY
Offers Y94.30/35
Bids Y93.80, with stops seen through Y93.75/65

EUR/USD $1.3825, $1.3800, $1.3750, $1.3725, $1.3700
USD/JPY Y94.00, Y93.65, Y93.40/35, Y95.00, Y95.50
EUR/JPY Y132.60, Y134.00
AUD/USD $0.7700
USD/CAD C$1.1360, C$1.1400

The dollar declined to a four-month low against the euro and weakened versus the yen on speculation the U.S. may lose its AAA credit rating.
The dollar headed for its biggest weekly drop in two months versus the euro after Standard & Poor’s yesterday cut its outlook on the U.K.’s AAA credit rating, and Pacific Investment Management Co.’s Bill Gross said the same will happen to the U.S. “eventually.”
The dollar weakened also after U.S. Treasury yields rose the most in two weeks yesterday.
The yen rose to a nine-week high versus the dollar after Japan’s Finance Minister Kaoru Yosano said the government won’t intervene in the currency market and the Bank of Japan raised its economic assessment.
The yen strengthened as the Bank of Japan kept its target lending rate at 0.1% at the end of its policy meeting today and raised its economic assessment for the first time since July 2006.

EUR/USD holds within the $1.3900/80 range.

Japan's benchmark stock indices ended Friday's session lower, although shy of the session worst levels. The Nikkei 225 was lower by 38.34 points, or 0.41%, to stand at 9225.81. The
broader-based TOPIX was 5.56 points lower at 875.88.

Majors close
Nikkei -80.49 -0.86% 9,264.15
Topix - 4.86 - 0,6% 881,44
FTSE -119.77 -2.68% 4,345.47
CAC -85.96 -2.60% 3,217.41
Dax -138.27 -2.74% 4,900.67
Dow -93.00 -1.11% 8,302.00
NASDAQ -13.00 -0.93% 1,379.50
S&P -10.70 -1.19% 889.20
10yr Note +1.5100 +0.472% 3.353%
NYMEX Crude Oil -0.99 -1.60% 61.05
Gold +13.80 +1.47% 951.20

Asian stocks retreated, dragging the MSCI Asia Pacific Index from a seven-month high, as a strengthening yen hurt Japanese earnings prospects and the U.S. Federal Reserve projected a deeper recession.
Canon Inc., which got 28% of its revenue in the Americas last year, lost 2.4%. Takashimaya Co. sank 3.9%, leading declines among Japanese retailers, as the first cases of swine flu were confirmed in the Tokyo area.
Melco International Development Co., which operates casinos, slumped 9.7% in Hong Kong after a venture posted a loss.

European stocks dropped for the first time in six days as the Federal Reserve projected a deeper recession in the world’s largest economy and Standard & Poor’s cut the U.K.’s credit outlook.
British Land Co. declined 8.2% after the largest office developer reported a record annual loss.
HSBC Holdings Plc and Commerzbank AG fell more than 3% as Former Fed Chairman Alan Greenspan warned U.S. lenders will need to raise “large” amounts of money.
Vodafone Group Plc, the world’s biggest mobile-phone company, decreased 4.3% as Nomura Holdings Inc. advised selling the shares.

U.S. stocks declined for a third day, extending a global slump, after jobless claims topped economists’ forecasts and Standard & Poor’s said the U.K. may lose its AAA credit rating. Treasuries and the dollar declined.

Data released
07:00 France PMI (May) flash 43.1 41.0 40.1
07:00 France PMI services (May) flash 47.6 46.8 46.5
07:30 Germany PMI (May) flash 39.1 37.0 35.4
07:30 Germany PMI services (May) flash 46.0 44.2 43.8
08:00 EU(16) PMI (May) flash 40.5 38.3 36.8
08:00 EU(16) PMI services (May) flash 44.7 44.5 43.8
08:30 UK Retail sales (April) 0.9% 0.5% 1.1 (0.3)%
08:30 UK Retail sales (April) Y/Y 2.6% 2.4% 1.5%
08:30 UK M4 money supply (April) provisional 0.1% - 0.2%
08:30 UK M4 money supply (April) provisional Y/Y 17.4% - 17.8%
08:30 UK PSNCR (April), bln 5.2 2.5 28.4
12:30 USA Jobless claims (week to 16.05) 631K 630K 643 (637)K
14:00 USA Philadelphia Fed index (May) -22.6 -18.5 -24.4
14:00 USA Leading indicators (April) 1.0% 0.4% -0.2 (-0.3)%

The pound dropped against every major currency after Standard and Poor’s signaled Britain may lose its top credit rating for the first time as the government’s finances deteriorate amid the economic slump.
The U.K. currency had its biggest decline in a week versus the dollar and dropped the most in two weeks against the euro after S&P lowered the outlook on the U.K.’s AAA rating to “negative” from “stable.”
The dollar traded near an two- month low against the yen amid speculation the U.S. Federal Reserve will print more cash to boost purchases of assets to counter the global slump.
The euro rose to a four-month high against the dollar after a European manufacturing and services survey beat economists’ forecasts.
Britain would become the fifth western European Union nation to lose its rating because of the economic slump, following Ireland, Greece, Portugal and Spain. The U.K. plans to sell a record 220 billion pounds of bonds in the fiscal year through March 2010 as the recession cuts revenue and forces the government to raise spending.
The U.K.’s budget deficit this year will reach 175 billion pounds, or 12.4 percent of gross domestic product, Chancellor of the Exchequer Alistair Darling said on April 22.
The British economy, the second-largest in Europe, shrank 1.95 in the first quarter, the biggest contraction since 1979, when Margaret Thatcher became Prime Minister.

EUR/USD initially consolidated under the Asian highs, before a quick move to take out stops through $1.3810. Subsequent S&P revision to the UK outlook knocked cable down, with euro-dollar in turn slipping 100-points to $1.3737. Later rate recovered to the $1.3800 area, then – to $1.3920.

Resistance 3:Y96.70
Resistance 2: Y96.20
Resistance 1: Y95.00
Current price: Y94.14
Support 1: Y93.80
Support 2: Y92.60
Support 3: Y91.80
COMMENTS: Dollar holds within the range. Resistance comes near yesterday’s broken trend line from Jan 21 on Y95.00. Back above will point to further rise to Y96.20 (May 20 session high). Above the target comes at Y96.70 (May 13 and 19). Support is around session lows on Y93.80. Stronger level comes at Y92.50/60 (23.6% Fibo of Y110.70 - Y87.00 decline). Below losses extend to Y91.80.

Resistance 3:Chf1.1150
Resistance 2:Chf1.1050
Resistance 1:Chf1.0930
Current price: Chf 1.0901
Support 1:Chf1.0880
Support 2:Chf1.0760
Support 3: Chf1.0700
СOMMENTS: Dollar tries to recover with resistance comes at session high on Chf1.0930. Stronger level – at Chf1.1050 (yesterday’s high). Above the target comes at channel line from Apr 22 on Chf1.1150. Support is around session lows on Chf1.0880. Stronger level – is around Chf1.0760 (trend support line from Mar 13’2008)/ Break under opens the way to Chf1.0700.

Resistance 3:$1.6020
Resistance 2:$1.5960
Resistance 1:$1.5880
Current price: $1.5847
Support 1: $1.5820
Support 2: $1.5700
Support 3: $1.5510
COMMENTS: Cable corrected a bit after yesterday’s impressive rebound. Support comes at $1.5820, stronger – on $1.5700 (50% of $1.5510 - $1.5880 rise). Key support is near yesterday’s lows on $1.5510. Strong resistance comes at $1.5880 (session highs and channel lines from Mar 19 and Apr 28 crossing). Break above will strengthen bullish momentum and bring the rate to $1.5960. But stronger resistance is at $1.6020 (38.2% of $2.0150 - $1.3480 decline).

Resistance 3: $1.4080
Resistance 2: $1.4000
Resistance 1: $1.3950
Current price: $1.3903
Support 1: $1.3880
Support 2: $1.3820
Support 3: $1.3720
COMMENTS: Euro retreats with support comes at session lows on $1.3880, stronger – at $1.3820 (61.8% of $1.3730-$1.3950 rise). Key support is near Thursday’s lows on $1.3720/30. Strong resistance comes at $1.3950 (session high and channel line from Apr 28). Break above will target $1.4000 and $1.4080.

High Low Close
EUR/USD 1.3920 1.3728 1.3888
GBP/USD 1.5887 1.5513 1.5839
USD/JPY 95.23 94.00 94.40
USD/CHF 1.1054 1.0915 1.0934

EUR/JPY 131.42 129.84 131.13
EUR/GBP 0.8866 0.8722 0.8766
GBP/JPY 150.00 146.84 149.53
GBP/CHF 1.7383 1.7081 1.7323

Change % Change Last
Nikkei -80.49 -0.86% 9,264.15
Topix - 4.86 - 0,6% 881,44
FTSE -119.77 -2.68% 4,345.47
CAC -85.96 -2.60% 3,217.41
Dax -138.27 -2.74% 4,900.67
Dow -93.00 -1.11% 8,302.00
NASDAQ -13.00 -0.93% 1,379.50
S&P -10.70 -1.19% 889.20
10yr Note +1.5100 +0.472% 3.353%
NYMEX Crude Oil -0.99 -1.60% 61.05
Gold +13.80 +1.47% 951.20

03:30 Japan BoJ meeting announcement 0.10% 0.10%
05:00 Japan Leading indicators composite index (February) final 76.6 76.6
05:00 Japan Coincident indicators composite index (February) final 84.9 84.9
08:00 Italy Retail sales (March) adjusted -0.1% -0.7%
08:00 Italy Retail sales (March) Y/Y unadjusted -0.9% -3.1%
08:30 UK GDP (Q1) revised -1.9% -1.9%
08:30 UK GDP (Q1) revised Y/Y -4.1% -4.1%
12:30 Canada Retail sales (March) 0.5% 0.2%
12:30 Canada Retail sales excluding auto (March) -0.2% 0.6%