Monday, March 1, 2010

Market Updates 2:45pm 03/01/10


· Equity levels – As of 12:15PM, SP500 is up 10.73pts to 1115.22. The NAZZ is up 31.33 pts to 2269.58 and the Russell is up 12.31 pts to 640.87.

· Equities strong out of the gate to kick off Mar, spurred higher by reports of an aid package for Greece in Europe (Greek CDS spreads are ~35bp tighter, Spain is 17bp, and Italy is 7bp tighter), a bunch of M&A deals (inc. Merck KGaA/MIL, and others), and earnings optimism (the SOX is up close to 3% and breaking north of its 50day MA following the upside preannouncement from SNDK). Technicals increasingly look favorable (the sp has broken above its 50day MA today) in the near-term w/many anticipating a test of the near-term highs of ~1150. Volumes still not great and larger vanillas reticent to make large commitments on the long side (there is some profit taking today on the strength); shorts increasingly nervous to lay out more exposure and are looking to cover on any dip; the risk is to the upside at the moment. The tape is resilient, continuing to shrug neg. eco #s (like today’s ISM), w/investors taking the Goldilocks view that the poor figures over the last ~1.5 wks is either: 1) largely due to weather (meaning we will see a snapback) or 2) will give the Fed more ammunition to stay accommodative for longer. As has been the case for a while now, investors are keyed on developments in the fixed income markets (the Euro is off ~0.8% while the GBP falls ~1.7%).

· Equity Sectors – pretty broad strength in the market today, w/financials one of the few notable laggards. The sp500 financial index is off small, hurt by banks (esp. the regional banks, which are down ~1% on the day); insurers and REITs are offsetting the bank weakness. On the upside, tech, health care, industrials, discretionary, utilities, materials, and capital goods are all up >1%. Within tech, the SOX is rallying close to 3% (helped by strong SIA sales #s and upside preannouncements from SWKS, SNDK) and is breaking north of its 50day MA. Media stocks also are strong, as IPG extends its strength from Fri (recall they reported earnings Fri morning) – IPG is up another ~8% on the day and is breaking out technically. Telecom services and staples are up less than 1%.

· Best Performing SP500 stocks: MIL, SNDK, IPG, MU, AIG, RDC, PLL, WYNN, PCLN
· Weakest performing sp500 stocks: BBT, AES, RF, QCOM, PCS, SLM, KEY, MI, VMC, HCBK

· Commodities: Commodities are stronger across the board despite a stronger dollar. Copper is the big story here as an earthquake in Chile is creating some supply worries. Copper is up around 1.75% today although it was up as much as 5% overnight. Gold is mostly flat on the day, trading right around $1119 and off its lows. Oil is up around 20c, just under $80. Oil has traded right around $80 for most of the morning. Natural gas continues to be weak, down another 5c to $4.75.

· FX: USD (DXY) is up around 0.8% today, just slightly off its highs of the session. The dollar is up 0.85% against the Euro, near its highs. Interestingly enough, Greece, Spain, Portugal, Italy, and Ireland all saw their CDS spreads tighten significantly today despite a weaker Euro. The dollar is up over 1.7% against the Pound, although off its highs, amid some concerns that the General Election could produce a hung parliament which would fail to tackle Britain’s budget deficit. The dollar is also up 0.3% against the Yen, just off its highs of the day, while the Euro is off around 0.5% to the Yen.

· Corp Credit: Corp credit is outperforming the tape as IG spreads narrow 2.75 bps and HY gains 13/32 of a pt.

· Treasuries: Treasuries are little changed today as 2s rally slightly to yield 81 bps while 10s are unchanged at 3.62%. The 2-10 year spread saw a slight steepening to 281 bps, 10 bps below last Monday’s all time high

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