Monday, March 22, 2010

Equity Sectors --Market Update – “Real” buying wasn’t too prevalent, $SPY

·         Market Update – stocks opened on the lows as the weekend headlines on health care and Greece spurred some selling at 9:30am, but prices rallied nearly from the start and the sp500 nearly set a new high by the end of the day (sp closed up ~6 points to 1165 after hitting a high of 1167; the high for this rally is ~1170).  Technically, we held the 1050-1053 level this morning.  Flow wise, the desk noted some sellers this morning, but there was no follow through and people weren’t interested in pressing.  As the selling abated, equities were able to lift higher.  The buying demand wasn’t strong (more a case of sellers pulling back) and there remains high levels of skepticism towards the strength (a lot of incredulous reactions to the rally today).  Fundamentally, the HC headlines this weekend weren’t too much of a surprise (HC stocks started to rally strongly late last week) and European officials last week indicated that nothing substantive would come from this week’s EU Leaders Summit (Greek CDS started to widen out last week).  Bottom Line on the move – another relatively quiet/light volume session.  Today’s strength more due to ambitious shorts that tried to press too hard at the open being forced to turnaround and cover.  “Real” buying wasn’t too prevalent, although there remains a firm underlying bid to the tape that is preventing any meaningful pullback.  Breadth is strong as the rally rolls onto new groups (like HC over the last few days).


·         Equity Sectors – the big story of the day was health care, which traded up ~0.6%, although ended off its best levels (the space was up >1% this morning).  The HMOs had a split performance, w/some of the Medicare/Medicaid names outperforming while more commercial levered stocks were sold (keep in mind the HMOs have rallied ~9% over the last few days).  Consumer discretionary stocks ended up >1% and finished as the market’s best acting big group (retailers were decent performers, but the big strength was in autos, which were helped by the ALV upside preannouncement, and the casinos).  Energy lagged, finishing dwn ~0.3-0.4% on the day (crude was weak this morning but rallied strongly off its lows; SLB opened weaker too but ended the day down ~1% after a profit warning).  Despite the energy softness, materials ended up >1% and outperformed.  Utilities were hit, w/some worry that Congress could move forward on climate change legislation given the momentum after HC; also worries that the higher earned income tax that will come from the HC legislation could hurt the high-yielding group.  Tech was a mild outperformer vs. the sp500, w/the bulk of the strength confined to the semis (SOX ends up >2% w/memory and equipment leading on the upside).  Financials performed pretty much right inline w/the broader tape.  Transports underperform, but keep in mind this group is coming off a pretty strong rally and was prone to some profit taking (airlines rallied ~1% within transports). 

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