Wednesday, March 17, 2010

Overview: · Market Update · Equity Sectors – · Commodities: $ZION

· Market Update – stocks still end in the green although off their best levels; the sp500 (cash) traded all the way up to ~1170 today but failed to break through that level (we closed at 1166). A late afternoon downgrade of the global financials from Citigroup is being used as an excuse for the pullback from today’s highs (Bernanke/Volcker’s joint testimony this afternoon didn’t really contain any really neg. headlines; on the HC front, the House Dems scored some victories today as a couple Reps moved into the “Yes” camp, although there is still a long road ahead on this front). Momentum exhibited some signs of slackening starting earlier in the session, as traditional “horseman” stocks (like AAPL, GOOG, RIMM, AMZN, BIDU, PCLN) were notable underperformers while stocks like X and AKS also had large intra-day reversals to the downside. Color from the desk remains consistent – there is a bid to stocks on weakness (like we saw in the last 25 min of today’s session), although people aren’t chasing prices and there isn’t panic when it comes to buying. Near-term, stocks are extended and could use a consolidation period (the sp500 has rallied 12% nearly non-stop since the 2/5 bottom). That said, performance anxiety is
setting in, esp. in the groups that have had strong moves (like the banks, which are up 22% YTD) – this could become a bigger theme heading into month/Q-end. Shortterm focused HFs dominating flow while larger long-only MFs have been quieter (not really taking profits but also not adding much to longs). Technically there isn’t a ton of resistance on the upside (1165 and then 1177 on cash are seen as the next levels but people are increasing eyeing the Lehman Sept ’08 gap getting filled in the low 1200s). The calendar is pretty barren for the most part over the next few weeks (the big events will be the Mar jobs report on Fri 4/2 and the kick-off to earnings w/AA on 4/12), an environment that has been favorable for equities going back months (recall the start of both the Q3 and Q4 reporting periods coincided w/a sell-off in stocks
while the tape rallied once earnings wound down).

· Equity Sectors – financials and energy lead the tape higher, w/both ending the day up 1%. Financials’ strength was pretty broad, w/insurance, banks, REITs, and esp. asset managers all trading well (the sp500 fin index is up 10% w/the banks up 22% YTD – both leading the market). Energy was helped by coal stocks (MEE was up 5.8% after last night’s deal). Tech ended up just 0.3%, lagging the tape, despite the SOX being up more than 1% (the SOX is one of the few large indices that has failed to set a new high for this rally). Health care lagged, ending up just 0.12%. Materials finished up 0.6%, although a lot of the big steel/metals weakened (X, NUE, CLF, AKS, FCX all finished in the red although AA closed up 5%).

· Best Performing SP500 stocks: LSI, VMC, IP, MEE, HIG, AA, S, LNC, ZION
· Weakest performing: CTXS, X, NUE, BSX, CBS, XRX, NBR, SNDK, MOT, CHK.

· Commodities: Commodities were mixed in the afternoon. Copper inched higher in the early afternoon, and traded flat into the bell to finish up ~1.7%. Gold sold off in the afternoon, finishing near its lows around $1119, down 0.3%. Oil rallied after selling off in the morning – it finished up 1.2% near $82.65. Natural Gas traded flat into the bell, closing near its lows around under $4.30, down ~1.3%.

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