Friday, March 19, 2010

Markets Headlines/Desk Color ..SP500 changes to its US indices - Yale University’s endowment #YALE

Markets Headlines/Desk Color

·         PT desk color - 1.44 to 1 better to sell - Strong Flow; Large Cap 72% and Mid Cap 17% of total Market Cap; Consumer Staples, Financials, Information Technology and Materials better to sell; Industrials and Telecommunication Services better to buy; ETF's 9% of sector flow

·         Treasury technicals – from Krauss - Today’s 3.615% bearish outside day in Cash Tens could be a very important yield bottom, as it failed exactly on the Feb-March resistance trendline of the bearishly-skewed post-Dec 31 triangle pattern.  Initial bear confirmation would require a sustained close through Tues’ 3.685-3.69% trendline breakout. This event would seek 3.75-3.78% next week. Medium term, the bear triangle measures to 4.02-4.11% using Classical and Elliott measuring techniques, expected within the late-April to mid-June time frame.

·         SP500 changes to its US indices - S&P MidCap 400 constituent Cerner Corp. (NASD: CERN) will replace BJ Services Co. (NYSE: BJS) in the S&P 500 index, S&P SmallCap 600 constituent MEDNAX Inc. (NYSE: MD) will replace Cerner in the S&P MidCap 400, and MicroStrategy Inc. (NASD: MSTR) will replace MEDNAX in the S&P SmallCap 600 index after the close of trading on a date to be announced.

·         US equities strategy – from T Lee - historical analysis points to further gains following a 10% rally in 5 weeks. Looking at quintiles, following a top quintile 5-week gain, a further 5.1% gain has followed over the next 6 months, above the 3.7% overall average for all periods. The win ratio is also more attractive, especially 6 months out at 72%.  Our 2010 S&P 500 EPS forecast is $81, above the bottom-up consensus estimate of $79.53. Overall, estimate revisions continue to be solidly positive. Since 06/09, Up revisions as % of total has consistently remained above 50% (most recently 55%) and is similar to 2003 to 2006, when this remained above 50% for 35 months.  The bulk of the positive revisions are in pro-Cyclical groups, led by Technology and Consumer Discretionary.  We identified 25 stocks that we believe should continue to benefit from improved visibility and strong earnings revision cycle: The tickers are: PQ, CDNS, GDP, CHK, AMR, PXD, ZRAN, KAR, ENOC, MRVL, GMR, AMAT, VECO, GNK, LCC, KMT, BRCM, DIVX, DE, UAUA, AAPL, RHI, ROK, PVG, and BTU  

·         Equity fund flows - Total equity fund flows (excluding ETFs) were positive, with inflows of $533 mm, compared to $840 mm of inflows last week. Domestic equity funds had $389 mm of inflows compared to $350 mm of inflows in the prior week. International and Global equity funds gained $144 mm of assets compared to inflows of $490 mm in the prior week.  Worthington  

·         Asset managers in 1Q are up 4.04% on average compared to the S&P 500 up 4.58%.  Worthington

·         Yale University’s endowment is cutting its target allocations in hedge funds to allow for bigger stakes in private equity and real estate; Yale boosted the fund’s private equity target to 26 percent from 21 percent and its real assets allocation, which includes real estate and commodities, to 37 percent from 29 percent – Bloomberg

·         Insurers bought corporate debt at fastest pace in 5 yrs in ’09 - Insurers’ net purchases of corporate bonds climbed to $153 billion in 2009, with the greatest portion coming in the first quarter when yields were at their highest of the year (That compares with outflows of $59 billion in 2008, and accounts for the biggest inflows for the industry since $172 billion in 2004) – Bloomberg

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