Thursday, February 18, 2010

Yesterday’s Trading 02.17.10

Yesterday’s Trading 02.17.10

· Equity Levels: SP500 ends 1099 (despite a few attempts failed to get up through 1100), up
4.6 points/0.4% on the day; Nazz ends up 0.5% (just shy of the 50day MA – 3 points under);
the R2K ends up 0.6% (remains above its 50day MA).

· Equities had a decent bid to them all session; Helping the tape today: 1) some pos.
headlines out of Europe (the strong Spain debt issue and the Greek Jan budget coming in
better than expected; late in the session, the FT said Greece would attempt to come to market
next week w/a syndicated loan issue to build credibility w/investors); 2) earnings – WFMI
and DE are the highlights in the US while financials stood out overnight (on Tues it was
Barclays and Wed morning ING rallied); 3) eco numbers better-than-expected (housing
starts and IP; also – the Jan budget statement @ 2pmET came in lower/better than expected);
4) Washington headlines – the Treasury reported late in trading that permanent mortgage
modifications jumped 75% M/M in Jan while Obama held a press conf today talking up the
benefits of the stimulus program this morning (and the WSJ noted that the bulk of the
infrastructure stimulus is still to come).

· Desk color - Despite the modest rally, volumes/attendance/conviction levels all remain on the
light side and the SP500 failed to sustain a move north of the technically important 1100
level. That said, stocks were able to shrug off a strong dollar rally (the DXY closes up 0.9%
and more than makes up for Tues’ weakness) and some hawkish Fed headlines (the minutes
were as expected although the line about “several” Fed officials wanting asset sales in the
near-term spooked some people). A lot of the flow continues to come from short-term
focused HFs while larger vanillas haven’t done a whole lot in the last 72 trading hours.
Continue to see a sellers strike although a lot of the aggressive short covering is starting to
abate (the covering really kicked off after we failed to follow through on the downside back
on 2/5 but has been petering out in the last couple sessions). Longs didn’t have enough to
break through 1100 as real vanilla buyers on the sidelines.

· Equity Sectors – similar to mid-day, weakness in the commodity-linked stocks on back of
the stronger buck (this group saw some profit taking following big ramps during Tues’
session; despite the dollar more than recouping Tues’ sell-off, materials/energy stocks only
pulled back small today). Financials trade inline w/the sp500 helped by large banks (C,
BAC), life insurance (off the Morgan Stanley sector upgrade), and REITs (continued M&A
optimism) while the regional banks were weak. Health care led the market for the whole
session (the HMOs in particular had a bid to them today). SP500 staples index was one of the
best performing groups, although a lot of this was on back of WFMI (which advanced double
digit % after earnings). Capital Goods outperformed on back of DE’s earnings.

· Best Performing SP500 stocks (from Bloomberg): WFMI, SNDK, IRM, DE, BSX, THC,

· Weakest performing sp500 stocks (from Bloomberg): FMC, NBR, RF, TSO, CBG, MOT,

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