GLOBAL MARKETS-, dollar gains

(Refiles to fix typo in headline)

* U.S. stocks slump as fear of more bank failures grows

* Dollar rises versus yen after strong U.S. factory data

* Oil slips below $69 a barrel on equities, strong dollar

U.S. stocks fell sharply on Tuesday as growing concerns about the U.S. banking system and over whether a recent rally in equity markets is warranted drove investors to the relative safety of bonds and the dollar.

Oil prices fell as the economic concerns outweighed surprisingly bullish U.S. data: the manufacturing sector grew in August for the first time in 19 months, while pending home sales hits a two-year high in July.

Government bond prices on both sides of the Atlantic rose as falling stocks enhanced the allure of lower-risk safe-haven debt despite the fresh evidence supporting the view of a global economic recovery.

There are “new concerns about the health of the banking system, the number

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”Despite the bad news the market is confused,” says Crisis Strategy Alert senior analyst Charles Delvalle. On Monday the futures were down over 80 points. Yet somehow, the market ended the day in the green. Then yesterday, the Dow futures were down over 100 points. So how did the Dow Jones recover most of the losses and end down less than 10 points? The bulls aren’t happy. And neither are the bears. For once, both camps seem absolutely befuddled. But here at Notes, we think it’s only a matter of time before we see a big move happen. Echoing Charles’s sentiment is Jack McHugh, writing at The Big Picture… Divining a directional change in market prices is tricky, even foolhardy, but perhaps the market leadership names will be instructive. Ever since the great bear market of 2007-2009 began, it has been led by the financial stocks. No matter which direction

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U.S. stocks rose on Thursday as investors bet the U.S. economic downturn may be easing following reports on fourth-quarter economic growth and weekly jobless claims that landed roughly in line with expectations.

Standouts in the broad run-up included shares of Best Buy , up 11.3 percent to $37.24 after the electronics chain’s quarterly profit topped estimates and its yearly outlook boosted optimism about consumer spending.

Retailer Wal-Mart Stores Inc was among the top boosts on the Dow, rising more than 2 percent to $52.88, while the S&P retail index gained nearly 5 percent.

Shares of natural resources companies rose along with higher commodity prices. Shares of steel maker Nucor rose 5.6 percent to $41.25 and U.S. Steel Corp was up 5.9 percent to $24.86.

“Obviously the tide is shifting. We’ve gone from every piece of news being incrementally bad

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Andrew Mickey: Times are tough. But they’ve been bad, downright horrible, many times before. One of the worst times was in the early 80’s when you were making some bold (and correct) moves.

So what investment strategies are you using now? And how is the global crisis and credit contraction impacting your strategy moving forward?

David Dreman: Basically it’s a value strategy. So I’m always looking for value. And what I would want to own now is stock. All stocks are cheaper. But they’re reaching extremely cheap levels.

The markets are probably cheaper than maybe in the 1950s. In the 1950s I think, the Dow was maybe 300, 400, something like that - maybe 500. Then it went to 1500.

So, I mean there is huge upside.

I think this is probably a good time to start nibbling and just

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Large banks are way down in the past 12 months, and as a consequence their trailing yields are well above normal.  That potentially creates substantial long-term equity income opportunity, but the big question is whether the dividends that make those yields will hold or be cut.

If you subscribe to the “buy it when it’s cheap” philosophy, then you really need to evaluate any sector when it sinks the way large banks have done.

If you conclude that taking a position (partial or full) in large banks is the right thing to do, we believe that you should buy the sector, not individual banks (unless you have high research-based conviction about the individual company).

If you buy the sector, you are exposed to systematic risk for banks (general market risk and industry specific risk, such as more mortgage market trouble).  You would probably hold …

Large banks are way down in the past 12 months, and as a consequence their trailing yields are well above normal.  That potentially creates substantial long-term equity income opportunity, but the big question is whether the dividends that make those yields will hold or be cut. 

If you subscribe to the “buy it when it’s cheap” philosophy, then you really need to evaluate any sector when it sinks the way large banks have done.

If you conclude that taking a position (partial or full) in large banks is the right thing to do, we believe that you should buy the sector, not individual banks (unless you have high research-based conviction about the individual company).

If you buy the sector, you are exposed to systematic risk for banks (general market risk and industry specific risk, such as more mortgage market trouble).  You would probably hold some stinkers in the group, but you would also hold

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Banks have had a rough time lately and the market performance of their stocks reflect that. Now that Secretary Paulson and some others are calling a bottom for the financial crisis, it is timely to look at the Keefe Bruyette & Woods Large Bank Index and the ETF that tracks it (KBE).

Technicals:

The five-year chart shows the KBW index (BKX in black) versus the S&P 500 (proxy SPY in gold). The BKX 200-day average is shown in blue and the 50-day average is shown in violet.

The YTD chart shows the KBW large bank ETF (proxy KBE in blue) versus the S&P 500 (proxy SPY in red).

The KBE candlestick chart provides alternative detail of the YTD performance of KBE alone, along with its 200-day and 50-day day moving averages.

KBE has massively underperformed the S&P 500. As of May

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