Around the markets: Dow retests its March low, state muni sale sees lower demand, and speculators find a friend

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A few notes from around the markets today:

-- Can the Dow defend its lows? The blue-chip Dow industrials this morning briefly slid below their multiyear closing low of 11,740.15 reached on March 10, dropping as low as 11,725 after the latest bleak reports on consumer confidence and home prices. But the market then bounced higher. At about 10:30 a.m. PDT the Dow was up 35 points to 11,876.

A new closing low for the Dow would reinforce the bears’ case that the spring upturn in the market was nothing but a sucker’s rally. Most other major market indexes, though, have more of a cushion between their current levels and their March lows. For more on what ails blue chips, in particular, see this post.

A new Dow low also could further complicate life for Federal Reserve policymakers, who meet on Wednesday and are virtually certain to leave their key short-term interest rate unchanged at 2%. The last thing Fed Chairman Ben S. Bernanke and peers need is another confidence-crushing event that could put more pressure on them to cut rates further -- while inflation pressures mount.

-- The state goes to the well. California today will set yields on its offering of $1.5 billion in general-obligation municipal bonds, the latest sale to raise money for the state’s large backlog of infrastructure projects. Treasurer Bill Lockyer, as usual, gave small investors a chance to put in orders for the tax-free bonds ahead of institutional investors.

But the retail order period, Friday and Monday, didn’t bring in the level of orders the state saw at its bond sales earlier this year -- despite a rise in muni yields in recent weeks. Lockyer said small investors ordered $704 million in bonds, or 47% of the total offering. By contrast, the state got about $900 million in orders for its bond offering in early April. The state always pays its debts, but some investors still may be queasy about the projected $15-billion budget deficit for the new fiscal year.

-- Just leave it to Wall Street? Possible quote-of-the-day from the U.S. Senate hearing today on whether Congress should do something to kick investors and speculators out of commodity markets, or limit their presence, in an attempt to bring down prices of oil and other raw materials:

‘Prohibiting investment opportunities for institutional market participants effectively substitutes the judgment of Congress for the judgment of trained financial investment professionals,’ said James Newsome, president of the New York Mercantile Exchange. ‘It would be premature to adopt a legislative solution for an unproven and unsubstantiated problem.’

But let’s not forget -- and I’m sure Congress won’t -- that the judgment of ‘trained financial investment professionals’ brought us the subprime mortgage debacle.