· Market Update – stocks off small as traders use the situation in Greece, along w/some sluggish eco readings (like today’s jobless claims), as an excuse to take profits, but the selling so far is very minimal (more a case of the very strong buying from Wed taking a breather than it is sellers really pressing). Any weakness continues to be viewed as a buying opportunity and shorts are looking to pullbacks to cover; no one is really willing to lay out fresh shorts into this tape. The buying continues to be real as performance anxiety increasingly setting in; both larger MFs/vanillas and quicker trader types are adding long exposure (we aren’t seeing as much chasing on the upside today like we saw Wed). Investors remain very nervous w/the market and its unabated strength; but at the same time it doesn’t seem like people are as invested as they want to be. Earnings season remains very strong – UPS’ big upside preannouncement Wed night is the latest example (UPS is up 6% today). LSTR, JBHT, and YUM are all up several % today after reporting numbers. Even companies that had large moves on Wed are seeing follow-through buying today (see the action in INTC – the stock is up another 3% on the day despite being up 3% yesterday; LLTC is up again also). The eco data was mixed today, but if anything this is being spun as a positive (esp. the jobs) as it: 1) permits the Fed to maintain their current policy stance; 2) permits corporate earnings to continue their impressive turnaround (the big upside in margins/productivity, helped by tepid headcount expansion, has been a boon for profits for the last two qtrs). The #s out of China were better, although Reuters actually reported them Wed morning (so it wasn’t a surprise) and there are fresh worries that Chinese officials could take tightening measures soon (rates, RRR, yuan, etc). Latest technicals from Krauss (out last night): next resistance at the 1225 200 week MA, 1229 Oct ‘07 62% retr, then 1240 ‘08-’09 Head and Shoulders bottom objective; Near term trend stays up above 1190, and 1175 (for sp500 cash).
· Equity sectors – Industrials are the top performing sector today, led by UPS’ pre-announcement last night and the rest of the transports index. Tech is the next best space, up 20 bps, as we’re seeing continued buying in semis following INTC’s earnings Tuesday. Discretionary is flattish, but still outperforming as YUM leads the group. Financials and healthcare are lagging on the day. Materials is lagging the tape as well today. If investors wanted any excuse at all to think we are due for a pullback they could look to the fact that metals were the first to roll over in January when we sold off. So far stocks like X and AKS are already more than 10% below their April highs. Utilities, telecoms, and staples are the worst sectors in the market today as investors continue to shun low beta assets in preference for the riskier stocks.
· FX : the dollar is up ~0.5% (DXY) as some headlines out of Europe weigh on the Euro. The euro is off 0.8% against the dollar. Wire services are reporting that Greece is close to giving up on its US$ denominated bond sale (something Greece has denied) b/c of tepid demand and that officials from the EU, ECB, and IMF will be visiting Athens on Mon (this trip is heightening speculation that an activation of the rescue framework could come soon). Greek CDS actually tightened a bit on the reports of Mon’s visit although the euro remains weak. The pound continues its strong run higher (it is up small against the dollar) as investors grow more comfortable about the upcoming election.
· Treasuries: 2yr TSY yields continue to move lower (off another 3bp to 1.02%) as Fed commentary (inc. Bernanke yesterday) and tepid eco #s (inc. this morning’s jobless claims) reinforce for many that the Fed will really be “low for long”. 10yr yields are down ~3bp today. A bit of a fear bid b/c of the situation in Europe is also helping.
· Corp credit: IG is ~1/2 tigher and HY is up ~1/4 of a point. Credit is outperforming equities small today.
· Commodities: Commodities are mostly weaker today with the exception of gold, which continues to hold steady as the safe haven trade outweighs the strength in the dollar. Copper is off around 0.3%, but off its lows amid a stronger dollar. Oil is off 45c to $85.40, near its lows as the dollar rallies. Natural gas is getting slammed today on the storage report, off around 4% and just barely holding the $4 mark.
Catalysts to Watch
· Credit card companies will release their mastertrust #s on Thurs
· A lot of Fed speakers – Fisher, Stark, Lacker, Bullard, Lockhart, Yellen.
· Volcker will speak at 3pmET.
· European Finance Ministers meeting on Fri and Sat in Madrid.
· IMF, ECB, EU to visit Athens Monday on aid (Reuters)
· Argentina – will unveil its planned $20B debt swap today (Bloomberg)
Corporate Calendar for the week of Mon Apr 12
· Thurs Apr 15: Earnings after the close (ISRG, GOOG, KKD, VMI, AMD, PBCT). Analyst meetings (TS).
· Fri Apr 16: earnings before the open (GCI, KNL, FHN, MAT, GE, PBR, BAC, GPC, Sony-Ericsson).
Economics Calendar – daily view
· Thursday, Apr. 15th: US (NAHB Housing Market Index)
· Friday, Apr. 16th: US (Housing Starts, building Permits, U. of Michigan Confidence); Eurozone (Eurozone CPI); Other (Canada Manufacturing Sales).
Economics Headlines
· Initial claims for the week ending April 10 increased 24,000 to 484,000, a clear disappointment. Labor Department officials noted that the increase could reflect administrative backlogs as claims from the prior week weren't yet processed. Even so, that's not great news as it implies that the true number of claims filed in the previous week were even higher than reported, and the reported number showed a hefty 18,000 increase from the prior week. Given all this noise, its probably best to look at the four-week moving average, and there the picture is also worrying: the four-week moving average increased to 458,000 last week, up 10,000 over the prior two weeks. M Feroli.
· Fed Surveys – the Philadelphia Fed survey came in at 20.2, which was essentially inline; the Empire was better @ 31.8 (vs. the St at 24).
· Industrial Production came in light at +0.1% (vs. the St +0.7%).
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