Thursday, March 4, 2010

Equities Update - Equity Sectors - Jobs - Commodities - Treasuries $MS

Overview: 5:01PM

·         Equities Update – equities extend their winning streak, w/sp500 closing up 4 points to 1122 (sp500 cash has been higher for the last 5 consecutive sessions and 10 of the last 13).  The desk has been VERY quiet all session (really all week) on both the vanilla and short-term HF front.  The data was mixed today, w/pending home sales coming in light while the initial jobless claims were inline.  Retail same-store sales came in ahead of expectations (retail stocks were some of the best performing in the whole market).  In Europe, Greece saw strong demand for its EU5B bond sale (3x+ oversubscribed w/”real money” buyers; the issue was trading higher in the grey market according to Bloomberg) but it doesn’t appear like we will see the larger EU20-30B German/French-state backed sale that was talked about in the press last weekend.  A whole bunch of mixed messages across asset classes today, w/equities up small, 2yr TSYs very weak (while 5s, 7s, 10s are flattish), credit wider (IG ends off wides but still out on the day; while financials stocks outperform, financial credit was wider), and the dollar rallies (the action in the 2yr and dollar today could be signaling a stronger-than-expected jobs number tomorrow).  Volumes in equities were VERY light w/neither bulls or bears having too much conviction.  Small late day rally really more a function of reduced liquidity/no sellers. 

·         Equity Sectors – financials continue to lead the market and finish the day up just under 1%; the large-cap money center/capital markets banks lead things higher on reduced worries around the “Volcker Rules” (the Senate is having a hard enough time getting the existing financial regulatory bill done and the “Volcker” addition will only complicate things).  MS and GS both finish up 3%+ and up through their 50day MAs.  The retailers have been leading since the open (on back of the strong same-store-sales releases for Feb) although the desk notes a lot of the strength has been on short covering.  Commodity-linked groups had a lid on them thanks to the very strong US$, although materials finish up small (energy ends the day in the red).  Within retail, AKS ends up ~7% on back of takeover speculation (mentioned on Bloomberg).  Tech ends about inline w/the broader tape despite the SOX being flat (VRSN, WU, and the internets, helped rally the group).  The health care stocks had a lid on them all session due to worries that Congress will move forward w/reconciliation to pass legislation (the HMOs dipped more than 1% today). 

·         Jobs - All eyes are on the BLS labor number tom (the consensus at the moment is for a 63K loss; JPMorgan is forecasting a 90K loss; the desk thinks the market could absorb ~150K loss and not be too worried given the weather).  See link for the JPMorgan (Feroli) jobs preview – “We expect that employment dropped 90,000 in February after changes of -20,000 in January, -150,000 in December, and +64,000 in November. We also expect that the unemployment rate, which fell from 10.0% to 9.7% last month, rose to 9.9%”. 

·         Commodities: As the dollar sold off a bit into the bell, commodities strengthened a bit near the close. Oil came off its lows to finish around $80.50, down 0.5% today. Gold came off its earlier lows to close at $1132 down 0.9% on the day. After falling nearly 20C this morning, natural gas traded flat into the bell to end at $4.55, down 3.8%. Copper came off its lows to finish down 1.8%.

·         FX: USD (DXY) finished higher on the day, coming off its highs to finish up 0.7%. The dollar came off its highs vs. the Euro to finish up 0.8%. The dollar also came off its highs a bit to finish up 0.45% vs. the pound. The dollar came off its highs a bit to finish up 0.7% vs. the Yen. The Euro finished down 0.1% vs. the Yen, off its lows.

·         Corp. Credit: Corp. credit lagged with IG spreads widening .25bps, while HY was flattish (gained 1/32 of a pt)

·         Treasuries: TSYs were mixed as the 2s sold off modestly to yield 86 bps, while the 10s were slightly higher at 3.61%.The 2-10 year spread tightened mostly to 2.75bps


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