The S&P 500 snapped a five-month losing streak in April with its best showing in more than four years, gaining 4.75 percent on the month. Some see that as a sign of a turnaround for stocks, which appear to be near their cheapest in over a dozen years.

A closer look at stock valuations, though, indicates U.S. equities might not be such bargains.

Sure, the price-to-earnings ratio for the S&P remains around 14 times forward earnings estimates, near its lowest level since 1995. On the surface, it suggests stocks are a deal at current prices.

Here’s the hitch: the S&P’s P/E rose 5.14 percent last month, the biggest monthly jump in valuations in more than five years, yet at an 8 percent faster pace than the rise in the index. Stocks got pricier faster than stock prices rose. That’s because the “E” in the P/E — forecast company earnings — continues to slide as analysts factor in such headwinds as the credit crisis and probable recession. That’s rarely a good omen for equity fundamentals.

In fact, over the past two months, stocks have grown 6.8 percent pricier, while stock prices are up just 4.1 percent. The last time valuations grew so quickly relative to prices was in late 2001, when the S&P staged what turned out to be a 3-month bear-market rally. By January 2002, stocks were back on their way down and would tumble another 33 percent before hitting bottom 10 months later.

Gold's oil-buying power is at its lowest in three years. (The chart shows the price of oil rising relative to the price of gold.) Hedge funds and other traders who play the gold/oil spread could be taking profits. Otherwise, this is hard to explain, since gold is considered a leading indicator of inflation.

In the past two weeks, crude oil prices rose to a record near $120 a barrel, while the spot price of gold fell from around $950 to $870 an ounce. Today an ounce of gold buys 7.65 barrels of oil. When gold was near $1,000 an ounce earlier this year, an ounce bought more than 10 barrels of oil. Gold's weakest point relative to oil was in 2005 around 6 barrels.

Is the underperformance signalling that inflation expectations are overblown? Perhaps the Fed knows something ... it cut a key interest rate another quarter percentage point on Wednesday and said it expected inflation to moderate in coming quarters, as energy and commodity prices level out. "I am still not getting why gold is trading down here and crude is up there. So something's gotta give," said Jonathan Jossen, an independent floor trader on the COMEX gold floor.

The latest data on new home sales paints another grim picture of the U.S. real estate market. The pace of sales of new single family homes and condos fell to its slowest in 16-1/2 years in March. Inventory of unsold homes would take 11 months to work off at the current rate — that’s the biggest inventory glut in nearly 27 years.

Yet that seemingly ugly situation could be a signal that the worst is over for the new home market. Only twice previously in the history of the new homes sales data series has the months’ supply reading hit 11 months or higher — April 1980 and September 1981. Both those occasions marked a turning point for the market: Inventories of unsold homes plummeted as the sales pace soon improved.

(Ed’s note: This post was edited to alter an editor’s headline to stress that one reading of the data suggests the worst ‘may be’ over in the housing slump, instead of one lonely signal that the worst ‘is’ over.)

The most powerful government bond market rally in years is showing signs of petering out. Investors appear increasingly reluctant to pay up for pricey Treasuries and they’re showing a nascent appetite for risk. The turnaround remains in the early stages and could quickly reverse itself, yet even now some significant pain is being felt among bond mavens.

U.S. Treasuries hit their high-water mark on March 17, the day before the Federal Reserve’s latest interest rate cut, with yields on two-year Treasury notes ending at 1.33 percent, their lowest since July 2003. The Fed’s 75-basis-point reduction the next day disappointed many bond investors, especially those hunkered down at the front end of the yield curve where Fed policy expectations are paramount.

Up to that point, the JPMorgan government bond index had notched a total return of more than 15 percent since mid-June 2007, when worries about the subprime mortgage market collapse set the Treasuries market on fire. The net total return on the benchmark S&P 500 over the same run? Negative 14 percent.

Since March 17, though, bonds are broadly lower and stocks are up 7.6 percent. JPMorgan’s index of shorter-dated Treasuries, with durations from one to three years, has fallen 0.88 percent over the past three weeks. At a glance that may not seem a horrific performance. Nonetheless, that is the index’s worst slump over a similar stretch in four years. The last time it fared so poorly in such a short time? Spring 2004, when bonds sold off just before the Fed embarked on a two-year rate-hiking campaign.

A basket of stocks meant to send the first smoke signals of broader recovery is on a tear. Will the broader market follow?

The Merrill Lynch early cycle index, made up of auto makers, home builders, retailers and building materials companies, is up 6.8 percent this week and 7.25 percent so far this year. To compare, the benchmark S&P 500 is off 6.5 percent in 2008. (All of the XE components are in the S&P 500). Within the XE, there have have been big comebacks in home builders - Pulte Homes

1: Dec 14, 2006
Bear Stearns posts record earnings, touting huge profit gains from then-booming businesses advising on mergers and arranging credit derivatives, distressed debt and leveraged finance deals.

Bear stock closes at $159.96. The average price target from Wall Street research analysts covering the stock is $166.24 according to Reuters Estimates.

2: Jan 12, 2007
Bear shares close at a record $171.51 on momentum from its strong earnings report the previous month. The average price target: $174.

3: May 24, 2007
Bear shares close at $147.55, a six-week low, after Goldman Sachs slashed its quarterly earnings target for its rival investment bank, citing concern about Bear’s heavy exposure to the mortgage securitization business. The average price target: $181.73.

4: June 14, 15 & 16, 2007
On June 14, Bear reports earnings declined for the first time in four quarters on weaker results from its mortgage securities business. On the 15th, the Wall Street Journal reports a hedge fund run by Bear has suffered big losses on soured subprime mortgage investments. (A second fund with similar troubles would soon emerge.) The next day, the 15th, the Journal reports that Merrill Lynch, a creditor to the fund, seized some of its assets. The stock closes at $150.09 on the 15th, a Friday. The average target price: $181.

5: July 17, 2007
As losses from subprime mortgages begin to begin to threaten credit markets around the world, Bear Stearns informs investors in its two struggling hedge funds that the funds have “very little value” remaining. Bear shares end the day at $139.91. The average target price: $178.23.

6: Aug 5, 2007
Warren Spector resigns under pressure as co-president and co-chief operating officer, having lost the confidence of long-time CEO James Cayne for his handling of the subprime mortgage crisis. The stock closes at $113.81 on Aug 6, a Monday. The average target price: $164.29.

7: Oct 5, 2007
Prosecutors launch a criminal probe into the collapse of the two Bear Stearns hedge funds. The stock closes at $131.58. The average target price $144.17.

8: Dec 20, 2007
Bear reports its first-ever quarterly loss, driven by $1.9 billion of bad debt write downs. It also says executives will not receive annual bonuses. Bear shares close at $91.42. The average target price: $121.67.

9: Jan 8, 2008
James Cayne is replaced as CEO by investment banker Alan Schwartz. The stock closes at $71.01. The average target price; $111.36.

10: March 12, 2008
Responding to market rumors of a cash crunch at the bank, Bear CEO Schwartz goes on CNBC television and assures viewers that the firm has ample liquidity. The stock closes at $61.58. The average target price: $98.87.

11: March 14, 2008
JPMorgan, backed by the Federal Reserve, provides an undisclosed amount of emergency financing to Bear Stearns. Bear says its liquidity position had deteriorated dramatically in the previous 24 hours. The stock plunges to close at $30.85. The average target price: $93.62.

12: March 16 & 17, 2008
JPMorgan agrees on March 16 to buy Bear for $236 million, or $2 a share, representing just over 1 percent of the firm’s value at its record high close just 14 months earlier. The deal essentially marks the end of Bear’s 85-year run as an independent securities firm. Bear shares end March 17, a Monday, at $4.81 on optimism another buyer may emerge. The average target price: $2.

Wednesday’s $5 surge in the price of oil was the largest one-day increase ever for crude, according to Reuters EcoWin data, and it stands as just the latest example of the big price swings that have gripped the energy complex since oil overtook the $100 a barrel mark.

At its peak Wednesday, when the front-month Nymex contract traded at $104.95, the gain on the day briefly was $5.43 — also the biggest move ever to an intraday high from the previous day’s closing level.

But look at a more telling gauge of oil market volatility — daily percentage move, which provides the magnitude of a price move relative to current market levels. A close read on that data suggests the market today is actually far more calm than it was one decade ago — or even two — when crude was trading below $20 a barrel, more than 80 percent cheaper than today.

On average over the past 20 days, oil has swung from the previous day’s close in a range from up 1.9 percent to down 1.2 percent. A longer horizon, looking back over the past 50 trading days, shows the range to have been from up 1.5 percent to down 1.4 percent.

But rewind about 10 years to mid-1998 and you’ll find that the 20-day average daily range was from up about 3.7 percent to down 2.7 percent, and the 50-day moving average percentage swing was from up 2.6 percent to down 2.1 percent. Of course, the price then? Less than $14 a barrel.

Business could hardly be slower in the junk bond market, but that means the bankruptcy business is set to go into overdrive.

Global high-yield bond sales are off to the slowest start since the 1991 U.S. recession as an anemic U.S. economy, worldwide credit crunch and no appetite for risk put the squeeze on corporations and investors alike.

That’s not only a striking change from the go-go days of the leveraged buy-out boom, it is a sign Chapter 11 filings are about to shoot higher. In previous cycles, the years following a crest in junk bond sales have been typically followed by a surge in defaults and, finally, bankruptcies.

The party’s already started in 2008. Sixteen publicly traded companies have filed for bankruptcy this year. At the current pace, nearly 100 public companies may file for Chapter 11 protection this year, which would be the most since 2003.

“2008 will be a busy year for insolvency professionals,” says Sam Gerdano, executive director of the American Bankruptcy Institute. “Whether it’s a record year remains to be seen.”

Continued claims for U.S. unemployment insurance — a crucial gauge of the labor market — rose last week to 2.81 million, the highest in two years, when Hurricane Katrina caused a short-lived spike in the number of jobless. The current upward trend in continuing claims has been underway for the last 18 weeks — the longest rising trend since early 2003.

Even more foreboding, the four-week moving average of continuing claims has been rising within a zone associated with the last five recessions — between 2.45 million and 2.80 million. (The last five recessions are marked out in grey columns in the graphic above). Since the most recent recession in 2001, continuing claims gradually fell during a recovery, but the four-week moving average bottomed in mid-2006 at around 2.45 million. That level is significant since it marks roughly where the four-week average was at the outset of three of the last four recessions. The top of the zone is important since the 4-week average has been in an uptrend and hit 2.80 million or more seven times since 1970, or six if one excludes the Katrina spike. Of those times, five have been during recessions.

The claims data along with the second take on fourth quarter gross domestic product growth of a mere 0.6 percent point to a conclusion that is undeniable to some. “Those who argue a recession is still improbable will have a much tougher time defending that position following today’s releases on fourth quarter GDP figures and the weekly claims for jobless benefits. Both serve to corroborate what many other economic indicators suggest: the 11th recession since World War II has very likely begun,” said Bernard Baumohl, managing director with The Economic Outlook Group.

Beans in the teens, wheat in the teens, corn in the ... well, above $5 a bushel. Do we have a bubble here? On Thursday, a Wall Street Journal story said farmers were wondering if grain prices would go the way of dot-coms or, more recently, housing. Wonder they should. (A Sept 28 Reuters story "U.S. 'grain bubble' in the making," now looks a little premature.)

U.S. wheat prices are up 6 percent so far this year, topping $14 a bushel for the first time ever, at least on the Minneapolis Grain Exchange. That followed a 77 percent gain last year. Corn in 2008 is up 10 percent at 11-year highs, following last year's 14 percent rally. Soybeans are toying with $13 for the first time, having gained 76 percent last year.

Some argue that agricultural commodities are less susceptible to a U.S. economic downturn. People still must eat. The Chinese are able to improve their diet as they get richer, for one. The biofuel crop craze has diverted food from people and livestock. Strange weather around the world has also wrought havoc on supply. Yet, over the last three decades, it looks like downturns in economic growth have preceeded declines in agriculture prices. (In the chart above, recessions are the shaded gray columns.)

And what are some of the most dangerous words in the market... "This time it's different." But what do you think? Are grains overbought?