Wall Street preview: A happy Monday for stocks, finally?

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Some notes from around the markets this morning:

--- Bounce, already! If Wall Street can’t rally today, there really may be no hope. Foreign stocks surged overnight on optimism about the latest moves by European governments to stabilize the banking system and bring down short-term lending rates. And the Federal Reserve early today said Europe’s major central banks would offer unlimited dollar loans to financial institutions there. The Fed said it would ‘accommodate whatever quantity of U.S. dollar funding is demanded.’

In technical parlance, the stock market is ridiculously oversold after last week’s record 18.2% drop in the Dow Jones industrials, chart-watchers say. No matter where you think share prices will be in six months, they are overdue for a decent bounce in the next six hours.

--- Drop, already! The dollar is likely to be the victim today if all goes as planned in other markets. As measured by the DXY index, the greenback on Friday reached its highest level since June 2007 against a group of six major foreign currencies. The dollar has provided a haven as fears of a global financial collapse have escalated. As those fears abate the buck is due for a breather.

That would be good news for American investors who’ve seen their foreign stock holdings walloped this year. A falling dollar would help repair some of the damage. As of Friday, the average European blue chip stock was down 45% year to date in euros, but the loss was 48.5% measured in dollars. Mexican stocks were down 32.6% in pesos but 42.3% in dollars.

--- Watch those yields. The Treasury bond market is closed today in observance of Columbus Day. When trading resumes on Tuesday the focus may be on long-term yields, which spiked last week even as stocks plunged. The 10-year T-note yield ended at 3.87% on Friday, up from 3.61% a week earlier and the highest since late August.

Some analysts wonder whether investors are starting to choke on the massive new supply of Treasuries flooding the market to finance Uncle Sam’s bailouts. Others say cash-desperate investors were dumping bonds last week to meet margin calls. Either way, a continuing rise in long-term yields would be big trouble for mortgage rates and the housing market.