Although down most of the day because of poor May retail sales, which dropped 1.2%, the first red month since September, the market rallied into the close, and ended up modestly for the day.

Today's unofficial closing bell numbers:

Dow 10,211.07 +38.54 (0.38%)
S&P 500 1,091.60 +4.76 (0.44%)
Nasdaq 2,243.60 +24.89 (1.12%)

Today was an up-day that started out in positive territory and stayed that way nearly the entire day. Earnings news took little out of the indexes even if there was profit taking after many individual reports. There was also no real economic data to digest, so stocks acted on their own.

Here were the official closing bell levels:

S&P 500 1,207.18 +9.66 (0.81%)
Dow 11,130.59 +38.54 (0.35%)
Nasdaq 2,500.64 +20.53 (0.83%)

Is inflation starting to smolder? There may be some smoke, if price data from the United Kingdom is telling.

Inflation in Britain, which, like the U.S., passed a fiscal stimulus package, rose at an annual rate of 2.9% in December, 1 percentage point higher than the annualized rate reported for November, Bloomberg News reported Tuesday.

Further, the consensus now argues that the Bank of England will increase its key, short-term interest rate from the current 0.50% to 1% in Q4 2010, according to a Bloomberg News survey.

First of all what is sovereign debt? Sovereign debt is created by the issuance of bonds by a country's government. When the financial meltdown occurred last year, governments around the world issued bonds to obtain money for their respective stimulus programs. The amount of debt (bonds) issued worldwide has been astronomical.

Now, investors around the world are worried that some countries are in danger of their bond markets collapsing or, worse case scenario, for the country to default on its bonds.

UK insurance companies saw worldwide premium income plunge 18% in 2008 to GBP215.3 billion, according to International Financial Services London, an independent research organization. Its Insurance 2009 report says that 2009 will be a fairly tough year, as well, with premium bouncing back in 2010. Long-term premiums were the challenge last year, as they account for 80% of UK insurance business. The financial crisis and an increase for long-term protection converged on insurance rates, pushing prices lower. Premium income in this corner of the market fell almost 25% to GBP168.1 billion in 2008.

The expectation, last year, that damage to insurers' balance sheets and an increase in claims -- particularly for financial services liability coverage -- didn't materialize, as carriers had enough capital on hand to absorb the losses sustained on both sides of the balance sheet. As a result, insurance pricing has been kept under control.

The numbers cited here for bank rescue costs are staggering -- way beyond our imagination. Keep in mind that we are talking trillions, not billions. You might want to etch these numbers in your memory to say that you have lived through perhaps the greatest financial crisis of our time.

• The U.S. government and the Federal Reserve have spent, lent, or committed $12.8 trillion to bank rescue, which amounts to about the value of everything produced in this country as of March 31.
• EU governments have approved $5.3 trillion of aid, more than the annual GDP of Germany.
• The UK pledged $1.1 trillion to restore confidence in its lenders, the most of any EU member.
• The top three EU states providing capital injections were the UK with $781.2 billion, Denmark with $593.9 billion and Germany with $554.2 billion.

Yesterday S&P downgraded its outlook for the British economy to "negative" because government debt in the U.K. may equal 100% of GDP. The pound tumbled on the news.

Today the dollar followed suit and dropped to a five-month low, indicating just how fast these markets can move. The drop was blamed on yesterday's downgrade. The dollar fell 0.4% to $1.3941 against the euro, 0.1% against the pound to $1.5839 and 0.2% to Y94.17 against the yen. The dollar index, which is valued against a basket of currencies, dropped 0.2% to $80.349

When the economy gets tough, eat fried chicken. This must be the mantra of many Britons; at least, that's the way Yum! Brands (NYSE: YUM) is betting. The company this weekend announced it was opening 200 to 300 new stores in north England and south Wales over the next few years, increasing its current concentration by about 30%. On top of relatively good earnings reported for the fiscal fourth quarter earlier this month, Yum! Brands is looking almost ... optimistic. Could it be?

It could. Not only is KFC opening outlets in England and China as the rest of the world cowers in job-cutting fear of the Things To Come, but the stock is in a hopeful place; at about $28.70 this afternoon, up 0.24% on the day and, having recovered from a low near $22 in November 2008, seemingly headed in an upward arc toward its year-ago territory above $35. At this price, and with this great hope for the future, KFC could be a good buy.

Barclays (NYSE: BCS) posted earnings that would be the envy of almost any other global bank. In the process, it gave the troubled banking industry some hope that the future will not be one of ongoing losses stretching well into this year, if not into next.

The bank's second half surprised analysts. According to Bloomberg, "It looks like a pretty good underlying performance and start to 2009," said Michael Trippitt, a London-based analyst at Oriel Securities Ltd., who has an `add' rating on Barclays." A lot of the improvement came because many of Barclays large consumer and business service divisions did well when the effects of toxic asset where taken out.

The UK today announced a series of huge investments in its credit markets. They go well beyond bailing out banks, and the programs could be used as examples of what other large national economies may have to do.

According to the The Wall Street Journal, "The U.K. government also announced that the Bank of England will set up an asset purchase program to buy high quality private sector assets." Put more simply, the UK will buy the debt of corporations and other entities.

The program moves well beyond the steps taken so far in the UK and the US because it pushes the government's actions beyond the banking system. But, that is what may be necessary. Even companies with strong balance sheets are having trouble getting credit. The lack of capital is cutting off expansion. In some cases, corporations with debt coming due may have to default, even if their underlying businesses are in relatively good shape. The state of bank balance sheets has taken them out of the positions as lenders of first resort to the entire corporate world.

Will the new program work? Maybe so. The largest criticism of bank bailouts has been that the banks keep the money to improve their reserves. That won't be an issue if the government is providing the money directly into the lending system.

Douglas A> McIntyre is an editor at 247wallst.com.

Banks around the world have been raising capital in the last few months. If the market is efficient, then the cost of capital for these banks should tell us something about how risky they are. Based on the relative cost of capital of banks in the U.S. compared to those in France, Germany and Switzerland, the world's riskiest banks are right here in the good old USA. The safest banks? French ones.

How so? Here is the rough (due to different capital structures) after-tax cost of capital for the banks in different countries:

• U.S.: Morgan Stanley (NYSE: MS) is paying a 17% interest rate and Goldman Sachs Group (NYSE: GS) pays almost 17%
• UK: Barclays pays 16%; HBOS, Lloyds TSB; and Royal Bank of Scotland pay about 12%
• Germany: Commerzbank pays 10%
• Switzerland: UBS's interest rate is relative bargain of 9.9%
• France: BNP Paribas, Societe Generale, and four others pay the lowest rate -- 5% -- for their capital

Maybe there's some sort of trading opportunity to short U.S banks and go long French ones. C'est la vie!

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing, will be published by Portfolio on December 26, 2008. He has no financial interest in Goldman or Morgan Stanley securities.

Two organizations, one projection: a forecast of 86.9 million barrels of oil per day consumed in 2009.

The International Energy Agency and OPEC arrived at the same projection, suggesting that, in economist Peter Dawson's interpretation that "2009 is going to be a year of a slowdown in oil consumption growth, which is significant."

Moreover, Dawson is quick to highlight what's important in the above: slowing oil consumption growth in emerging markets. Oil consumption in the United States has been falling for more than two years -- it's projected to drop 3.1% in 2008 and another 2.3% in 2009. It's oil consumption in the developing world, primarily China and India, that really moves prices, Dawson said. Oil Monday closed up 52 cents to $115.11 per barrel.

'A small victory, that we'll take'

Right now it appears, for the first time in more than five years, consumption growth (not to be confused with a consumption decline) will slow, he said.

"It's a small victory, that we'll take, regarding the oil markets," Dawson said. "For the first time in a while we'll see some demand relief internationally, and that has to help lower oil prices."

A British trade group that reports on music retail has published new findings to Billboard Friday "indicating Britons buy more CDs than any other country, and are bigger consumers of legal downloads than any of their European neighbors." It's the fifth year the British have led CD purchases, buying an average of 2.3 CDs in 2007, while Americans only bought an average of 1.7 CDs. These findings come from the International Federation of the Phonographic Industry's new handbook out this week: the Recording Industry in Numbers.

Digital figures for British music downloads totaled $169.5 million in 2007, and were announced at the New Music Conference at London's Earls Court by the Entertainment Retailers Association Thursday. The association's chairman commented that British retailers offer "more and better music retailing than anywhere else in the world," but seemed to connect the higher CD and digital sales in the UK with consumers' love of music, rather than where the real strength of the report is: consumers apparent continued satisfaction with CDs and interest in downloads.

Even though this news indicates that CD sales are still steady, consumers buying an average of two CDs a year can hardly be that great for the music industry. In a market where CD sales continue to be seen as the lifeline of the industry, the reality of CD sales indicates how much digital downloads have to make up in order for some form of equilibrium in the industry. Clearly these numbers should force the industry to build up efforts to solidify and strengthen digital sales, but since it was put out by retailers, that group may resist such moves.

Cheerio! What to do if you're a 54-year-old former world leader, in good health, with Western sympathies? Days of leading a major country are behind you, but you're not ready to pack it in anytime soon. Link up with a major American corporation, of course! Tony Blair, who served as Great Britain's prime minister from 1997 through June of last year, has agreed to join with JPMorgan Chase (NYSE: JPM) in the role of part-time adviser.

The financial terms of the arrangement weren't disclosed, but one Manhattan recruitment consultant estimated in The Financial Times that Blair's fee would likely be more than $1 million a year (though that sum doesn't go quite as far in pounds these days).

After the massive announcement last week lowering the Apple Inc. (NASDAQ: AAPL) iPhone price and announcing the new models of the iPod family, MacWorld is reporting that the media giant is planning another announcement, this time in London on September 18. The event will take place at the Regent Street Apple Store and is by invitation only apparently.

The rumors about the event are centered around two things: the UK release of the iPhone, or an announcement that the iTunes Store will offer The Beatles catalog very soon. Once again, the speculations about Apple go straight for The Beatles, and once again the more likely reason is the most probable. But the report also indicates that "mum is the word" and that seems to be causing the most confusion. PC Advisor comments that the announcement for a UK carrier for the iPhone is hardly "mum" in the face of almost three months of U.S. sales.

Whatever the announcement is, we have another four days to continue speculating. Maybe we can all be shockingly surprised and see another new product or service released, but it just seems safe (considering the track record) that Apple is only going to announce a service new to the UK and not necessarily as exciting. In any case, while that is certainly not hopeful for UK residents at least they can be assured that any Beatles announcement should take place in London... or Liverpool.

Until then, "Your Mother Should Know" what the announcement entails...