By Greg Peel

The Dow closed up 7 points while the S&P gained one point to 1402 and the Nasdaq slipped 0.1%.

The Dow has now reached 13,175 which is only 104 points, or less than one percent shy of the early May closing high of 13,279 ? the highest close post-GFC. It's been a long, drawn out and very volatile affair, but the truth is Wall Street has seen a "bull market" ever since the March 2009 bottom. It certainly doesn't feel like a bull market, and investors remain largely absent. We cannot really call it a bull market until Wall Street breaks up into post-GFC blue sky, and does so with good reason.

We're sitting at these lofty heights presently on expectation of further global stimulus. Stimulus is intended to push risk asset valuations higher, but stimulus is only a reaction to otherwise dire conditions. There are many on Wall Street who dismiss such sugar pills and warn there can be no real rally until the need for stimulus diminishes, that is the global economy begins to look healthy. On the other side there are cries of "Don't fight the Fed" and "Just look at the valuations".

The US earnings season is all but over. In Australia we now have our own earnings season to provide catalysts, albeit such catalysts are likely to be more "alpha" (individually stock specific) than "beta" (market general) while we, too, await news from Brussels and Washington. If we do ultimately post a net earnings "shocker" by the end of this month then we, too, know that the RBA will be looking for reasons to provide stimulus ? that is to cut the cash rate.

The problem is that we may have to wait all month before anything new happens. Global economic data releases will continue to roll in in the interim, but if they're good they're good and if they're bad then stimulus measures seem all the more certain. Markets globally have set themselves now on expectation of stimulus, so they can't just keep pushing higher all month on that notion alone. There is a risk the Fed won't feel the need to act aggressively, and there's a much more ominous risk the ECB won't need to act either. Suggestions are that Spain will do what it can to avoid a bail-out ? and supposedly Spain has time to string things along before running out of cash ? and if so, in theory, the ECB will hold tight.

With the stock market seemingly now well positioned, attention turns to the bond market. Spanish two-year yields, for example, are 100bps lower now than they were a week ago and at 6.8%, the ten-year yield is sitting under the supposed 7% line in the sand of pending insolvency. Hence we have carts before horses and endless feedback loops. Lower bond yields may help Spain avoid a bail-out, but they're only lower because markets are expecting a bail-out. If there is no bail-out, and bear in mind a bail-out implies the ECB will intervene in bond markets, then those yields will spike again and force Spain to ask for a bail-out.

How do we stop this ride? I'm feeling nauseous.

Last night the US Treasury auctioned ten-year bonds and the buyers all went into hiding. The auction was only 2.5 times overbid compared to 3.2 times for the past four monthly auctions. US domestic money managers took only 5% of the issue compared to an average of 23% over those last four auctions. It was left to foreign central banks to pick up their usual 40%. Last month's settlement yield was 1.46% and last night's was 1.68%.

US fund mangers, and half the world, have US Treasuries coming out their proverbials. Prior to recent ECB optimism, those Treasuries were as expensive as they've ever been. Many envisage bond prices as being attached to a big rubber band which just keeps stretching further. When it snaps back, it will be violent. But respected bond traders such as Pimco's Bill Gross expected a snap-back from 2.5%, yet we've seen yields below 1.5%. When does all give? It's an important question for stock markets, because when money sitting in bonds flows out, it will be into risk assets and particularly equities.

We await news from the central banks.

Meanwhile, global consumer "staple" bellwether McDonald's announced last night that July saw the company's worst monthly sales in nine years. Most of the drop came from offshore. And Wall Street is trying to make new highs? On the other hand, department store giant Macy's posted a "beat" with its result and increased its 2012 guidance. While it appears Europe could seriously do with some stimulus, the need in the US is tenuous.

News Corp ((NWS)) reported last night and matched on earnings, but like so many US companies this season it missed on revenues. News took a hit on costs relating to the you-know-what scandal but this was expected, and its shares are down just a smidge in the after-market.

Elsewhere everything was quiet. US weekly oil inventories surprised analysts, as usual, with a big drawdown, but after some solid gains this week Brent closed up only a few cents to US$112.14/bbl while West Texas slipped a few cents to US$93.38/bbl. Base metals slipped a tad, gold has barely moved at US$1612.30/oz and the currencies were also stable, with the US dollar index at 82.33 and the Aussie at US$1.0573.

The SPI Overnight rose 7 points.

It's unemployment day in Australia today, and thereafter we'll see the monthly Chinese data dump of inflation, production, sales and investment numbers.

I've noted the News result, while today's reporting highlights include Telstra ((TLS)) and Tabcorp ((TAH)), among a handful of others.

Rudi will be loitering in Macquarie Park today as he appears on Sky Business at noon and again at 7.30pm for the Switzer show.

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