By Greg Peel

The Dow fell 36 points, or 0.2%, while the S&P lost 0.4% to 1685 and the Nasdaq dropped 0.4%.

It's high summer in the northern hemisphere, which is enough alone to ensure lower stock market volumes, squared up positions and a general lack of immediate interest. Another Mai Tai please Julio. For those not on a beach, Wall Street is about to be hit by a wave of important releases which has the whole world in wait and see mode. They include the Fed policy statement and June quarter GDP result on Wednesday, manufacturing PMIs from around the globe, including China, on Thursday, and non-farm payrolls on Friday. Thus volumes last night were anaemic.

The US earnings season is also still in swing, past half way for the S&P 500 stocks and heading into the longish tail. While weak revenues have again been the concern despite decent earnings growth, stocks beating on earnings have done so only by an average 3.2%, below the 4.3% average of the past year and the 7% average of the last four years. Cost cutting and deleveraging opportunities appear to be running out.

Yet Wall Street is still hanging around, more or less, at its all-time highs, as if waiting for a green light to go higher. There are many on Wall Street assuming a pullback is on the cards before the up-trend can reassert, but in backing this expectation traders have built up significantly extensive short positions. Notwithstanding any left of field bombshells, this short position and underlying longer term bullishness suggests the US indices will struggle to pull back much at all, and could jump sharply given the right excuse.

In Australia, it's a combination of watching what's happening on Wall Street, waiting for the local results season to begin in earnest, as it will this week, waiting for Rudd to name an election date and shuddering with fear over what policies might be offered up by either side beforehand. Government is not about governing, government is about winning elections. Populist policies intended to appease the small minded rarely sit will well with the wider economy.

The Australian market has come to a grinding halt. No more was this evident than yesterday, when the US dollar fell back through 98 yen triggering a 3.3% slide in the Nikkei, and nothing happened. Not to mention a 1.8% fall in Shanghai. The Aussie dollar has consolidated in a new range and the foreigners have left us alone again. Dips in Asia are no longer causing panic. Whereto now? Perhaps the result season will provide some clues.

The US dollar index was steady last night at 81.68. Disturbing talk in Australia from the Labor camp of a return to the indescribably insane policy of returning to surplus no matter what the cost had the Reserve Bank up in arms yesterday and the Aussie down 0.7% to US$0.9207 on expectations the RBA will have to rescue the situation.

There were no result reports of particular note in the US last night, just a few merger machinations. The only data release last night was pending home sales which fell by 0.4% in June. Higher mortgage rates post the Bernanke bounce have been blamed, although others point to falling inventories ? an otherwise healthy sign.

Gold slipped US$4.90 to US$1328.90/oz, while base metals mostly traded higher on small moves in London, following Friday night's falls. I was expecting a bit of a jump in the oils last night given the escalation in Egypt, but it seems energy markets are also in wait and see mode (notwithstanding a solid Egypt premium already in place). Brent rose US28c to US$107.45/bb last night and West Texas fell US26c to US$104.44/bbl.

Spot iron ore fell US90c to US$131.70/t

The SPI Overnight rose 4 points.

It will likely be another quiet 36 hours ahead before it all starts happening on Wednesday night. Australia will see building approval numbers today and the US will see house prices and consumer confidence.

On the local stock front, quarterly production reports are due from AWE ((AWE)) and Beach Energy ((BPT)), a quarterly sales report is due from Woolworths ((WOW)), while Credit Corp ((CCP)) and Navitas ((NVT)) will post full year profit results.

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