Thursday, April 29, 2010

MarkeT Summary from 04/28/10

· Market Update – equities manage a modest bounce today, demonstrating some of their usual resiliency by shrugging off Tues’ 2.3% drubbing and a mid-day Spain ratings downgrade by S&P.  However, a lot of the strength came as a result of short covering – there wasn’t a lot of real long-only vanilla buying.  The sovereign worries remain paramount although European CDS spreads tightened pretty dramatically from their worst levels of very early in the morning.  On the Greek front, reports that the IMF could engineer a EU90B+ 3yr bailout that would effectively take the country out of the public debt markets for the next 36 months helped sentiment, although investors are waiting for a definitive decision out of Germany (EU/IMF talks are expected to wrap up this Sun but Germany is seen staying somewhat ambivalent until that county’s election takes place on May 9; its prob. not a coincidence that a Eurozone vote on Greek assistance is scheduled for the next day on May 10).  The Spain downgrade today was taken in stride as it remains several notches in IG territory, its spreads remain behaved, and other agencies (Fitch today) have come to its defense (Fitch today said Spain remains AAA w/a stable outlook).  Spain’s FM said it won’t have any trouble rolling over its debt.  The FOMC decision @ 2:15pmET was largely a non-event as it was nearly exactly as anticipated (the language on economic growth was upgraded slightly but wording on inflation, rates, “extended period”, and other critical components remained unchanged).  There remain a lot of balls in the air out of Washington, w/headlines late in trading today signaling that Dodd and Shelby have reached an agreement on parts of the legislation, potentially paving the way for a successful vote tomorrow (Majority Leader Reid has said he will hold another vote Thurs to move forward on debate).  Bottom Line on all these moving pieces: equities no longer have the cover of exceptional earnings as the reporting season winds down.  This is allowing the twin negatives of Europe and Washington to dominate the headlines.  There was a lot of technical damage done on Tues (through the 20day MA, 1194, and 1190) that we couldn’t recoup on today’s bounce (i.e. we finished under the 20day MA of 1196 and well below the next important level at 1205).  Long onlys are staying put for the most part but haven’t been as aggressive defending stocks on weakness.  Shorts are more aggressive laying out exposure. 

· Equity sectors Financials led the market higher today, bouncing back after lagging yesterday on the Goldman hearing. In late trading, it was announced that the Senate is ready to move on with the debate of financial regulatory reform. Energy was the next best group, rallying this afternoon as crude made a nice reversal. All eyes will be on XOM as it is set to report earnings tomorrow. Materials were also higher, up around 0.9% on strength in DOW’s earnings and a bounceback in metals. Utilities were up 0.8% on strength from SO’s earnings. Industrials were up 0.75% on strength in multi industry stocks and airlines. Healthcare was slightly ahead of the tape on strength in managed care and some earnings. Staples were mostly in line, led by CVS. Telecom was slightly below the tape, helped by earnings out of S. Tech was up, but lagged today on weakness in semis and software name. Discretionary was the worst space in the market today, led down by weakness in autos and ODP

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