Wednesday, March 3, 2010

Market Internal Updates 03.03.10 $$



·         Market Update – equities helped higher by the Greek budget cuts (and subsequent weakening of the dollar/strengthening of the euro) and some decent eco #s (esp. the non-man ISM but also the ADP/Challenger labor reports).  M&A also remains an important theme for the market (NOVL is the latest transaction).  We got up through the ~1122 technical level and now people have 1130 in their sights; we are now just ~2.3% away from the 1150 highs (all on sp cash).  Flows on the desk remain consistent – larger vanillas not chasing stocks and volumes still not great; still a decent amount of skepticism towards the move higher.  PT desk has been busier vs. single stock, reflecting desire to achieve “equity” exposure in general vs. picking individual names.  For the rest of the day, people waiting for Obama’s HC speech @ 1:45pmET and the Beige Book @ 2pmET. 

·         strength across the board today in the market.  Industrials are leading things on the upside (within industrials, cap goods climb more than 1%).  ETN, PCAR, CAT, GE, FDX, TXT, etc, are all up on the day (JOYG is up 7% after its earnings).  Materials climb 1.7% and are the strongest sub-group in the market today (TIE, X, MWV, DOW, FCX, AKS all up >2%).  The weaker dollar and general optimism around global demand (see the JPMorgan all-industry PMI index update below) are helping the stocks.  Health care is one of the few laggard groups today - rising worries around Congress (Sen Harkin just told Politico that the Sen Dem Leadership has decided to push reconciliation) are one of the reasons the group is for sale.  The financials are trading about inline w/the broader market (banks are mild outperformers while the REITs fall into the red small). 

·         Best Performing SP500 stocks: NOVL, RSH, JDSU, FTI, TSO, TIE, MWW, ETN, MWV

·         weakest performing sp500 stocks: SPLS, WDC, LH, PCLN, BMY, CTSH, ABC, MCK, TDC

·         Commodities: With the dollar selling off, commodities have rallied as we go in the second half of trading. Despite crude inventories coming in higher than expected, Crude has rebounded as is now trading at $81. Copper has steadily moved higher and is up 1.64% (despite the major Chilean mines indicating they are now fully back online). Gold has come off its lows and is now trading at ~$1142.50. Natural Gas has also come off its morning lows and it trading at $4.77 heading into the afternoon.

·         FX: DXY (USD) fell around 11am and is trading at $79.90; down 0.77% The dollar was trading flat vs. the Euro for most of the morning, but has now reached its lows of the day; the dollar is down .85% vs. the Euro. The dollar has also reached its lows vs. the pound and is down 0.93% (the pound is being bolstered by some recent eco #s out of the UK this morning). 

·         Euro update – eurusd breaks up through 1.3695 technical level and now near highs of the day.....the DXY (dollar index) is breaking down through 20day MA (for first time since mid-Jan).  Color from the FX desk this morning on technicals - The big test today will be if we can trade through 1.3695, which has contained the last couple of weeks range. (Above that level at Friday's close will also lead to a bullish outside reversal off the lows on a weekly chart..) After that the focus will be on 1.3840, a break of which will break the trend of lower highs over the past couple of months.  Moody's this morning confirmed Greece rating, which is important b/c they have highest rating on Greece (if Moody's were to downgrade, then Greek debt wouldn’t be eligible at the ECB as collateral) - " Moody's says Greece's new measures consistent with current A2 rating, negative outlook

·         Corp Credit: IG trading about inline w/equities, tightening by 1.75bp; HY is up ~1/4 on the day and lagging slightly. 

·         Treasuries: With equities rally, TSYs have sold off as 2s move to 0.82% and the 10s have reach 3.65%. The 2-10 year spread has steepened to 2.83bps.


Catalysts to Watch

·         Central Banks - The ECB holds a meeting on Thurs and China’s National People’s Congress starts Mar 5.  There will also be meetings from the RBA and BOE. 

·         Health Care – Obama will make an announcement today about the "way forward" on health care @ 1:45pmET.  Politico reported at 11amET, citing Sen Harkin, that the Dem Senate leadership has decided to move forward w/reconciliation. 

·         HMO exec meeting on Wed - top health-insurance executives are expected to appear before the Obama administration's top health official to discuss health-care premiums.  WSJ  

·         Greece - Greece’s PM will be traveling to Germany on Fri 3/5. 

·         BAC – the Treasury will be auctioning off its warrants in BoA today

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