higher after opening in the red. Some of the items behind today’s strength: 1)
technically held 1060 support (right after the open); 2) jobless claims #s showed a
nice decline, allaying worries around employment; 3) Greece - 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; 4) strategic M&A (in
the utilities today); 5) headlines that a financial regulatory compromise could be in
the works in Washington that wouldn’t include a new consumer protection agency
(although this would theoretically help financials the most and they were laggards
today); 6) pos. comments from CSX at a Stifel conf today. Bottom Line – there was
no great single catalyst to explain today’s “strength”. Volumes weren’t all that high
and there still isn’t a ton of vanilla sponsorship on the long side (although they were
nibbling a bit more today on the long side). A lot of short covering today as well as
shorter-term buying in the higher-beta/momentum groups (metals, semis). For the
last couple days the US markets have slowed markedly coincident w/the Europe
close (around noon), signaling just how much we have become beholden to
sovereign developments across the pond (hopefully this won’t be a major topic for a
few days). All that said, desk noted that buying may abate ahead of the long
weekend (US closed Mon for President’s Day) and ahead of the European Finance
Ministers meeting (this is next Tues and which could bring more Greek
developments). In addition – there is some hesitation about any announcements out
of China in the next 24 hours on the eve of their New Year (i.e. any action taken on
the yuan, RRR, etc). The most interesting action occurred outside of equities today
(TSYs, esp. longer-dated ones, sold off following a weak 30yr auction). Technically
we did finish north of the 1071 level (on sp cash), a mild positive.
· Equity Sectors – pretty broad strength today w/financials being the lone exception
(they were flattish-to-dwn all day). Tech end up >1%, led by the semis (up >2%).
The tech desk notes that buyers are starting to come back into the group ahead of a
very busy week of earnings coming up. Commodity-linked groups led the market
(energy and materials) due to strength in the underlying resources (crude, copper,
etc). Metals stocks were some of the best performing in the whole market – CLF, X,
AKS, FCX, ATI, AA all up >3%. The TRAN index was up 1.5%, led by the rails (CSX
finished up 4% after making sanguine comments at a Stifel conf this morning). A lot
of strength in the homebuilders today (a land transaction helping sentiment a lot in
the group); the builders are up >3% today alone and are up >12% now YTD (best
performing group by far YTD). Some strength in the retailers ahead of the kick-off to
their earnings next week (most retailers have Jan-end qtrs, so their earnings come
later in Feb and into Mar). Financials lagged all day (the broader sp500 fin index
was flattish while banks dipped small).
· Best Performing SP500 stocks (from BBG): AYE, MEE, CLF, X, CNX, WYNN,
CAT, CMI, JDSU
· Weakest performing sp500 stocks (from Bloomberg): BSX, FLIR, ECL, MAS, DF,
PLD, FE, EXPE, SNI, S
· Commodities: Commodities soared today the dollar pared its gains and ended near
the flatline after news that Greece would receive some form of help from the EU,
although nothing specific. Oil was up close to 60c and back above $75after trading
down as low as $73.50. Gold was up nearly $20 and close to its highs, right around
$1095. Copper soared today, finishing up 4.75%, marking four straight days in the
green. Natural gas was also up 10c, finishing right around $5.40.
· FX: USD (DXY) was flat on the day after trading up as much as 0.6%. The dollar
gained 0.4% against the Euro, off 0.6% against the Pound, and down 0.2% against
the Yen. The Euro lost 0.65% against the Yen today.
· Corp Credit: Corp credit was positive today, but HY lagged as it only gained 3/8 of a
pt. IG was much stronger, outperforming the tape as spreads came in 3.25 bps.
· Treasuries - longer-dated TSYs weaken following another weak auction (this
time 30yr) - 2s actually rallied to yield 87 bps while 10s sold off and now yield 3.73%.
The 2-10 year spread saw a moderate steepening today and now sits at 286 bps,
just 2 bps from the all time high on January 11. We also had a 30-year treasury
auction that came in a bit on the weak side, with yields at 4.72% vs the preview of
4.687%. Not only was the 30yr auction weak, but there has been a lot of talk about
the weak indirect bids (signaling tepid overseas CB demand) and high direct bids.
Economics headlines
· Jobless claims for the week ending February 6th fell 43,000 to 440,000,
returning to the level they were at before the recent worrying spike up, which began
in the week ending January 16th. We now know that the cause of that spike, which
persisted for three weeks, was administrative issues in California, which had a
backlog of claims because the labor office was apparently understaffed earlier in
January and so didn't fully count all the claims coming in. A US Department of Labor
official said this week's claims were "as close to clean" as we've seen in a long time.
Claims are not yet below their previous trough of 432,000-433,000 reached
around the end of the year (though that trough may have partly been due to
California under-reporting), but the reversal of the upward lurch in claims does
allay concerns about a significant further deterioration in the labor market.
Looking forward, claims next week could get very messy due to the effects of the
severe weather issues on the East Coast. Feroli.
Catalysts to Watch
· Chinese New Year - February 14 will mark the first day of the Chinese New Year.
Economics calendar – daily view
· US eco release – updated schedule in light of the snow (from M Feroli): Jobless
claims were released on time this morning at 8:30 a.m.; Retail sales have been
delayed from Thurs 8:30 a.m. to Friday 8:30 a.m.; Business inventories has been
delayed from Thurs 10:00 a.m. to Friday 10:00 a.m.; Preliminary consumer sentiment
is scheduled to be released on time Friday at 9:55 a.m. The federal budget has
been delayed indefinitely.
· Int’l eco releases - Friday, Feb. 12th: Eurozone (German GDP, French GDP,
Eurozone IP, Eurozone GDP); Other (Japan Consumer Confidence).
Corporate Calendar
· Thurs Feb 11: Earnings after the close (MFE, O, AB, CSTR, EPIC, RNWK, ACL,
PRAA, SNWL, GDI, CAKE, NILE, BGC, PNRA, A, SVR, PRO, CHH, ROVI, CMG,
TUNE, CEPH). Analyst meetings (HNT, MU, ZION, QGEN)
· Fri Feb 12: earnings before the open (E, HCP, PDS, FMX, PAS, NAT, KOF,
ThyssenKrupp, IR, DUK)
Europe
· The Euro Stoxx finished dwn 0.74%; Oil & Gas were one of the few sectors to finish
positive, led by Total SA (after earnings) – financials lagged, driven down by Credit
Agricole, who lost nearly 4%. The FTSE outperformed the Euro Stoxx, though it
posted a much smaller gain than the sp500 – basic materials were the strongest
sector, driven higher by Antofagasta; Telecom was weak as BT group lost nearly 9%
· The DAX posted a similar loss to the Euro Stoxx. Healthcare traded higher off the
strength of Fresenius Se-Pre, and tech underperformed off of weakness in SAP.
· The MADX lost 1.75%, where similar to the DAX, healthcare was the best
performing sector, while financials traded lower caused by weakness in Santander.
· The BVLX also finished in the red today, despite a strong consumer services sector,
led by Grupo Media. Financials lagged off of weakness in Banco Popular.
· The ASE barely finished negative losing only .51 pts. to close at 1940.31.
Consumer goods outperformed off of more than a 5% gain in Coca – Cola. Tech
underperformed due to weakness in Hellenic Telecom.
Tech/Telecom
· Tech update – tech was one of the market’s better performing groups today (up
>1%), led higher by the semis. The desk noted buying in a lot of the highbeta/
volatile groups (semis, metals, etc). Nothing too specific behind the strength
although there has been buying in the group ahead of a very busy week of earnings
coming up (we get ADI, AMAT, NTAP, HPQ, NVDA on next Wed night and we get
DELL next Thurs night).
· Hardware – strength across the board today. PALM had a volatile session – opened
at its highs after a Citi upgrade but then came for sale amid worries about production
levels….the stock recovered from its lows after issuing a statement to
Reuters/Bloomberg saying that it only suspended production around Chinese New
Year and will ramp it back up after). NOK has been a laggard all session
(Bloomberg says the co won’t have any new product launches at Mobile World
Congress).
· Semis – have been the standout group all day (SOX up 2%+); MRVL and NVDA are
some of the best performing in the space. MRVL was mentioned positively at
Morgan Stanley and NVDA is seeing buy interest ahead of earnings next Wed.
AMKR a laggard, off 7%, after earnings disappointed (the guidance was light).
· Networking – the group is mostly higher except for a few situations; SWIR drops
20% after earnings disappoint. ALU is down 11% on back of earnings. The rest of
the group is higher. TKLC is up 11% after earnings (SONS up 4% in sympathy).
ARRS is up 4% post earnings.
· Internets – the group is higher for the most part although EXPE dips 4% (earnings)
and AOL is off small. YHOO and AMZN outperform.
· Solars – strength across the board today; JASO rallies 9% after earnings.
(barclays has cautious comments on the entire solar sector)
· Best Performing sp500 tech stocks (from Bloomberg): JDSU, NVDA, TER, XRX,
RHT, YHOO, AMD, ALTR, WFR, SNDK
· Weakest performing sp500 tech stocks (from Bloomberg): FLIR, WU, TDC,
NOVL, ADBE, MU, TSS
Financials
· Brokers – TRAD falls 9% after earnings; weighing on some of the larger online
peers (SCHW and AMTD). FBCM falls 7% after earnings last night (some other
smaller brokers weaker – TWPG and COWN are dwn 2-3%). MS is off 2% and a
notable laggard among the larger caps.
· Asset managers – pretty quiet; group is mixed; LM and BLK are laggards, off 1-2%.
GBL is up 6% after the Goldman upgrade and is outperforming. OZM climbs 4%
after earnings.
· Exchanges – ICE and CME both ramping ~3-4% on the day (the strength in
commodities could be helping).
· Life insurers – busy night w/earnings. PNX and PL both up ~2% while PRU falls
1% - al on earnings. TMK shares are flattish. Canadian life insurers are in the red
small post #s – MFC and SLF down ~1-2% each.
· Banks – the group has been under pressure for most of the day; cautious comments
from the TARP watchdog around CRE exposures being cited for the weakness.
Pretty mild selling though – more a lack of buyers causing the problem than
aggressive selling. STI, ZION, BBT, WFC among the laggards.
· MIs/financial guarantors – MTG, PMI, GNW, RDN, ABK are all in the green while
MBI drops 4%.
· Best Performing SP500 Financials (from Bloomberg): CBG, ICE, XL, CME, ALL,
HST, SPG, ETFC, MCO, NYX
· Weakest performing sp500 financials (from Bloomberg): PLD, AIG, LM, FHN,
STI, ZION, MS, AIZ, IVZ, AMP
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