Tuesday, March 2, 2010

The No Bullshit HalfTime Overview of the Market ---03.02.10 1:16pm


·         Market Update – stocks continue their slow, steady grind higher; since bottoming at 1044 back on 2/5, the sp500 has rallied ~7%+ and is now ~2.5% away from the 1150 highs.  A lot of the usual suspects bring cited for the strength – continued comfort around the situation in Greece (Greek 5yr CDS is all the way in at ~313 according to BBG, down from ~343 yesterday and ~421 on 2/8), M&A activity (the CF/TRA is the latest example today, which follows on the ~$47B worth of activity from Mon), and stock buyback/dividend hike announcements (see QCOM, NDAQ and others).  Volumes still aren’t great although there is a growing sense that people are underinvested and not well positioned for continued upside in stocks (which could beget further strength).  Larger vanillas aren’t really chasing stocks higher; shorts continue to look to cover vs. laying out fresh exposure. 

·         Equity Sectors – pretty broad strength today, led by the financials (up 1%).  The big star performers today are the banks, which is nearly a 180 degree reversal from Mon; the BKX is up ~1.6% today and is now up 12%+ on a YTD basis (technically, the index is right up near the top end of its months-long range).  Commodity-linked groups are outperforming – materials and energy are up ~1% each.  Consumer discretionary is flat-to-down on the day (SPLS is off 7% after a disappointing earnings release this morning; keep in mind we get all the same-store-sales this coming Thurs morning).  Airlines are off 0.8% (CAL falls 3.5% after its traffic update). 

·         Best Performing sp500 stocks (from Bloomberg): TSO, QCOM, JBL, MEE, MI, ZION, VLO, CNX, STI, CME

·         Weakest performing sp500 stocks (from Bloomberg): SPLS, AIG, CF, JDSU, ODP, PBI, NYT, IGT, HRB

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

·         Economics headlines – there were no major data points released this morning, although auto sales are being reported.  GM said that the industry SAAR for the month was 10.6MM, which is ahead of the St’s 10.4MM. 

·         Fed Update - Fed’s Hoenig makes somewhat hawkish comments on CNBC (Hoenig says the Fed should raise rates “sooner rather than later” and that rates may need to be hiked despite high unemployment).  Recall that Hoenig dissented in the most recent FOMC decision and wanted the “extended period” phrase dropped.  Recall the Fed’s Plosser yesterday told the WSJ that “extended period” should be removed from Fed talk.  The Obama administration may make an announcement on its plans for the three vacancies on the Federal Reserve this week - "We may have more on that later in the week," White House spokesman Robert Gibbs told reporters (DJ). 

·         Commodities: As the dollar has come off its highs, commodities have rallied heading into the afternoon. Despite giving back some of yesterday’s gains overnight, copper has rallied in the morning and is now up 1.37%. Gold has also come off its lows as it is trading just under $1135, up almost 1.50% today. Nat. Gas is trading around $4.74, up 5c. Oil is trading just under $80.45 and is up 2.19% today.

·         FX: The dollar has come off its highs and is flat heading into the afternoon. The dollar is off 0.15% vs. the Euro, well off its highs. The dollar is up 0.3% vs. the pound heading into the afternoon, with the pound coming off its lows. The dollar is down 0.15% vs. the Yen, and the Euro is flattish against the Yen.

·         Corp Credit:  Corp Credit is lagging a bit, as HY spreads have gained 7/32 of a point while IG spreads have narrowed  ¼ of a bp.  Note that in financials, bank CDS is flat today despite the strength in bank equities (insurance continues to tighten however; AIG has tightened down to pre-bailout levels) 

·         Treasuries: Treasuries are pretty much unchanged from yesterday, as the 2s are flat at 80bps, while the 10s sold off a bit to 3.63%. The 2-10 year spread steepened a bit to 283bps.

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