Woohoo!…U.S. stocks racked up their biggest quarterly advance since 1998! The Standard & Poor’s 500 Index soared more than 15% between March 31 and June 30 - lifting its year-to-date performance marginally into the black, and breaking a streak of six consecutive quarterly declines for the S&P 500, the longest since 1970.

This champagne-cork-popping performance obscures a few trends that should be worrisome to the celebrants. First, the S&P 500 has gained no ground whatsoever since May 8, the first trading day after the Federal Reserve triumphantly announced the results of its banking sector “stress tests.” Second, the BKX Index of financial stocks has DROPPED more than 16% since May 8. (As we have noted in prior editions of the Rude Awakening, the finance sector has been leading the overall stock market - both to the upside and downside - for the better part of four years.

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Today we examine a couple of recent stories from Fantasyland - otherwise known as Wall Street. Seven of America’s largest banks repaid their TARP borrowings to the US Treasury yesterday, in the process providing one more occasion for hopeful investors to proclaim the end of the credit crisis.

The details of the repayments were as follows:

• Morgan Stanley (NYSE:MS) repaid $10 billion

• Goldman Sachs (NYSE:GS) - $10 billion

• BB&T (NYSE:BBT) - $3.1 billion

• US Bancorp (NYSE:USB) - $6.6 billion

• Bank of New York Mellon (NYSE:BK) - $3 billion

• Capital One (NYSE:COF) - $3.57 billion

• American Express (NYSE:AXP) - $3.39 billion.

Lost in the euphoric brouhaha over the TARP repayments was the dispiriting news that Standard & Poor’s had downgraded the credit ratings of 18 large American banks, including one of the seven that repaid its TARP loan!

Incredibly, the US Treasury deemed Capital One sufficiently healthy

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Worldwide indexes reclaim that losing feeling,  The skinny on those TARP repayments and two curiously conflicting assessments,Four factories for one McMinimum Wage house and plenty more…

“Are things getting worse or are things getting better?” we wondered aloud in yesterday’s edition of the Rude Awakening.

In today’s edition, we provide a few answers – well, not answers, really…just observations from you, the Rude readership. In the column below, we present a few real-world anecdotes from Rude Awakening readers. This narrow sampling of economic observations is hardly scientific, but it may be illuminating nonetheless.

Before we get into these real-world stories, let’s examine a couple of recent stories from Fantasyland - otherwise known as Wall Street. Seven of America’s largest banks repaid their TARP borrowings to the US Treasury yesterday, in the process providing one more occasion for hopeful investors to proclaim the end of the credit crisis.

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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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