Tuesday, March 2, 2010

Consumer & Retail and Industrials/Materials/Energy

Consumer & Retail

·         Consumer stock lagging the tape. Retail under pressure on back of SPLS miss for Q/guidance which has shares off ~8%. DBRN catching a 3%+ lift after the Q while WRC trades dn slightly. In Grocers, KR and SVU catching a bid while SWY is dn slightly ahead of tomorrow’s analyst meeting where co has said it will provide 2010 guidance. In Restaurants, DPZ +4.5% after earnings. Auto space mixed as automakers report Feb. sales throughout the day. In Auto Parts, AZO +1% after Q while peers AAP/ORLY trade flattish. Protein space trading higher with SFD outperforming on positive sell-side comments (+4%). In HPC, group underperforms staples with KMB off 1% on a sell-side downgrade (off lows). On the trading desk, we’re seeing vanillas selling retail ahead of earnings/SSS this week. In Staples, desk is seeing rotation around HPC space, is better to buy in Food space from vanillas and better for sale from both HFs and MFs in Tobacco. SmallCap flows mixed with 2-way flows in Retail with vanilla buyers and HF sellers. Auto Parts flows mixed.



·         Industrials: Industrials are mostly in line with the tape today amid light volumes again. GE again underperforms and as Financials trade well today I am out of reasons. Machinery and Multi's rising with the tide and haven't been outperforming as usual.  Seeing vanilla's on both sides of the action this Am as the S&P takes further steps above the ever important 1115 level.  DE & AGCO underperforming while TYC & TXT frustrate shorts this AM. Aero/def names continue to outperform, led higher by BA. E&Cs are outperforming waste todayas investors move into higher beta names on the heels of MDR’s earnings. Education names are weaker today as the counter cyclical group sells off due to investors appetite for more risk.

·         Transports: Transports are mixed today, as rails underperform for the second straight day while freight moves higher. Truckers are also lagging a bit today, notably LTLs, after their recent rally. Airlines are also underperforming, with almost all names in negative territory, as investors take profits following CAL’s RASM last night which wasn’t a big enough beat to drive further gains.

·         Homebuilders: Homebuilders are lagging today ahead of tomorrow’s pending home sales report. Recall yesterday that the space was up, but we still haven’t seen any new buyers since they came in to defend the names on last week’s pullback.

·         Materials: Materials are the best space in the market as the dollar moves off its highs and near its lows of the day, giving support to commodities. Metals are all stronger by around 2-4% as their respective commodities move higher. Steel stocks are up 2-3% as well on the strength in commodities and news that India steelmakers might raise the price of steel by April 1 following an excise tax. Chemical stocks are all higher with the tape while paper/packaging stocks are mixed. Fertilizers are all outperforming, with the exception of CF, after a report that Russia will impose a 15% export tax on potash, a positive for North American potash companies.

·         Energy: Energy shares are outperforming the tape today as crude jumps over $1.30, sitting right around $80 and natural gas breaks its losing streak, gaining 5c and nearing $4.75. Integrateds are lagging a bit today, up just slightly, after outperforming for most of yesterday. Servicers and drillers are outperforming on the day, building off of yesterday’s rally. Refiners bounced back today as most names are up 3-5% following underperformance over the past few days due to weak earnings. E&Ps are mostly in line with the tape as natural gas edges higher. Coal stocks are up sharply, around 4-6% on average as investors look to chase the momentum of the higher beta names. Shipping/tanker names are mixed, but most have recouped their losses from yesterday and late last week on disappointing earnings reports. Solar stocks are outperforming the tape today, bouncing back after their recent selloff and also on news that Taiwan’s crystalline solar cell makers are planning to boost spot prices due to increased demand in Germany, France, and Italy (Digitimes).

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