Tuesday, April 13, 2010

Market Update AT THE CLOSE $spy

Market Update – the sp500 extends its winning streak to 4 consecutive sessions (the sp has been up now for 10 of the last 12 days and hasn’t been down for two consecutive days since 3/25-3/24).  Equities did their best to sell-off in the morning, as a disappointing Alcoa earnings report Mon night, a UBS downgrade of a bunch of regional banks (which have been the best performing group in the market), and worries that Bernanke’s testimony tomorrow (@ 10amET) could be more hawkish than expected all provided ammunition for the bears.  However, while buyers were a bit hesitant at the open and this allowed stocks to sell-off, there was never any aggressive selling or shorting of this market.  The larger vanilla MFs continue to sit pat and use weakness as a buying opportunity.  Shorts are very hesitant to lay out fresh exposure given how resilient this tape continues to be.  Volumes/activity still pretty quiet (although headline volume #s skewed higher by ABK, which traded 717M shrs and had a range today of $1.62-3.39, and a couple other names).  While equities were in the red for the morning, corp credit was higher/tighter all day and outperformed.  AA did fall ~1.5% post earnings and the BKX dipped ~1% b/c of the UBS call.  However, other groups more than compensated today.  Consumer discretionary jumped 0.6% on the day (this space is up more than 4% already QTD).  GE shares continue to trade great ahead of its earnings this Fri (GE moves up more than 1% and hit fresh highs). 
·         Fed – early in the session there was some worry that Bernanke would use his testimony tomorrow before Congress (10amET:http://jec.senate.gov/public/) to lay the groundwork for a more hawkish FOMC statement on Apr 27-28 (the next scheduled meeting).  However, the dollar/TSYs never really reacted to this and most don’t think Fed officials have any intention of drastically changing their communications to the market.  Separately, the Fed Board of Governors today released the minutes of its latest meeting, where the Dallas Fed called for another hike in the discount rate (this didn’t seem to spook many people). 
·         Equity sectors – Discretionary was the best peforming sector, up over 0.5% and led by GT (7.5%) on positive comments from their CEO during their shareholder meeting and strength in HD and LOW. Tech was the next best sector, up 30 bps and led by INTC ahead of their earnings after the bell. Industrials outperformed as well, helped by FAST’s earnings this morning and strength in some multi industry and machinery names. The next test for industrials will be CSX’s earnings after the close. Healthcare and financials were flat as financials saw some weakness in regional banks. Materials were off around 35 bps on weakness from AA’s earnings and fertilizers due to a negative pricing pt for potash from OTR Global. Energy was the weakest sector in the market today due to a drop in crude on a report that the IEA sees more supply for 2010. Utilities and telecoms also lagged w/ utilities led lower by STR and OKE while telecoms were lower due to Q and T.  The bank stocks came for sale today on back of UBS’ neg. call on the group (regional banks in particular were hit), although the REITs had a huge move higher (sp500 REIT index closes up 2.5%, by far best performing in the market

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