Lookback on the Market 03.02.10

Overview:

· Stocks closed higher but ended the day off their best levels. There remains an underlying bid to the tape, w/investors pointing to the following as catalysts to buy: 1) optimism that Greece will be resolved (we should hear something on Wed about more austerity measures and the ECB will hold a meeting on Thurs; there remains various press reports about a German/French-backed bailout package in the works) and 2) “equity shrink” actions, inc. M&A (today’s CF/TRA announcement is the latest) and buybacks (NDAQ, PLT, and QCOM are just the latest today). Volumes remain tepid, which many take as a sign of weakness, but could also signal still-high levels of skepticism that are keeping investors on the sidelines. Large vanillas aren’t doing a whole lot of buying while shorts are more interested in covering than laying out fresh exposure. A lot of mixed signals, as stocks trade higher but credit weakens (IG wider) and Treasuries rally.

· Equity Sectors: financials one of the best performing groups, ending up 0.3%, although finishes well off the best levels of the day. Banks lead to the upside within financials, but also end well off best levels. Commodity-linked groups outperform (energy and materials). On the downside, tech weakened throughout the session today (MSFT’s sell-off was one of the main culprits – the stock swung ~2% peak-to-trough after its presentation at the MS conf). Discretionary stocks were sluggish all day, hurt by SPLS (which ended down 10% following earnings). The airlines dipped ~1%+ after CAL sold off 3% following its monthly RASM report.

· Best performing sp500 stocks: QCOM, TSO, MEE, JBL, HIG, SON, IP, JCP, FITB, TXT, STI, VLO, PCS, PCAR, CNX, SLM, MI, NEM, CME

· Weakest performing sp500 stocks: SPLS, AIG, ODP, Q, WDC, IGT, MU, MSFT, ETFC, S, JDSU, GENZ, BRCM, PBI, HRB, BBBY, DRI, TIF, BAC

· Technicals from Krauss: two fibo targets at 1122 and 1128, and then the 1130 barrier/Jan range breakdown as short term upside points.

· Sovereign CDS – tightness all around although off best levels of the day; late in trading Greece was just ~1-2bp tighter to 314 (off best levels but still down from the recent peak at 421 set back on 2/8). Italy is ~14bp tighter (to 106), Portugal is ~1bp tighter, and Spain was ~4bp tighter (to 103). Biggest tightening among sovereigns: Ukraine, Italy, Ireland; largest widening: Argentina, Venezuela, and Peru.

· Economics headlines – there were no major data points released this morning, although auto sales are being reported. Autodata says the industry SAAR is ~10.4MM for the month (which is approx inline w/the St); GM said the industry SAAR was 10.6MM.

· Commodities: As the dollar came off its lows, commodities gave back some of their earlier gains. Crude failed at $80 again to finish at $79.80. Copper came off its highs to finish up 1.19%. Gold also weakened into the bell, closing at $1132, up 1.27%. After surging higher mid-day, Natural Gas flattened out a bit to end at $4.72; up 0.81%

· FX: USD (DXY) came off its lows in the afternoon to finish at $80.49; down 0.2%.The dollar came off its highs to finish down .35% vs. the Euro. The dollar came off its lows against the pound to finish up 0.23%. The dollar came off its highs vs. the Yen to finish down 0.45% The Euro came off its highs against the Yen, losing 0.10%.

· Corp Credit: Corp Credit lagged as IG spreads widened to 1.75bps, while HY lost 5/32 of a pt. despite the strength in bank equities, bank credit was flattish all session.

· Treasuries: TSYs continue to inch higher; 2yr yields fall under 0.8% for the first time since 2/8. The 10s were relatively unchanged at 3.61%. The 2-10 year spread was unchanged at 2.82bps; still 9 bps below the all time last Monday