Afternoon Overview Maket Update

OVERVIEW

· Market Update – US equities putting in a strong session so far today. Hard to
pinpoint a specific catalyst. Technically we did hold 1060 this morning. The jobless
claims did show a nice drop, allaying concerns around employment. On the Greek
front, the European Summit is over (thankfully) and hopefully the headlines can stop;
spreads tightened in Europe a bit although the Euro is weaker. While the final
outcome wasn’t everything the markets were hoping for, the message was enough to
remove Greece as a risk/overhang for the time being at least. The strategic M&A
deal (in utilities) also being looked at as a positive. There was some news in
Washington today - Dodd is negotiating w/Republican Corker on financial regulatory
reform and the two have agreed to shelve the consumer protection issue, although
this isn’t doing much for the financials (which are flat and underperforming the
market). TSYs continue their sell-off, giving a boost to stocks as funds get
reallocated (TSY yields at multi-week highs). Shorter-term focused investors
accounting for a lot of the strength although vanillas starting to nibble around a bit
more on the long side (still relatively inactive though); volatile/beta/momentum
groups like the metals and semis are leading us higher. We are north of the 1071
level, a positive technically (although will have to see how we close).

· Equity Sectors – strength is pretty broad today. Despite the dollar strength,
commodity-linked groups are very strong (energy and materials are both up >1%).
Coal stocks are very strong today (CNX, MEE, BTU up 3-5%) and driving energy
higher. Within materials, metal stocks catching a bid (X, CLF, AKS, FCX, ATI all up
3-5% and are some of the best performing stocks in the whole market). Rio Tinto is
up 2% after earnings. In tech, the semis are leading the group higher (the SOX is up
2%). Tech led this market lower throughout the year so far but the desk has noted
some buyers are starting to come back into the group ahead of a very busy week of
earnings next Wed/Thurs (HPQ, AMAT, NTAP, ADI, NVDA all come next Wed and
DELL is next Thurs). The transports climb 1.5% due to strength in the rails (CSX
made sanguine comments @ the Stifel conf this morning – this is giving a bid to the
whole group). Financials, which outperformed on Wed, are lagging today (the group
is flat). Homebuilders are up >3% and one of the best acting groups in the market
today.