Friday, April 2, 2010

Week In Review

Market Update – equities extend their weekly winning streak to 5 (the last down week for the sp500 was the one ended 2/26 and the decline was only 0.42% then; the last time the

sp500 has declined more than 1% in a week was the one ended 1/29). The move higher has been relatively slow and grinding, w/a decent underlying bid present but buying hasn't been panicked and investors aren't chasing prices higher. Despite setting a new intra-day high for this rally on Fri (1181 on the sp500), the market has been essentially flat since the middle of Mar (the sp500 hasn't moved up/down >1% in a single session since Mar 5). For this week specifically, volumes were very light, as the few investors at work (attendance was on the light side given the holidays) were more interested in preserving Q1 gains and waiting for couple major catalysts to occur (BLS, earnings, etc) before making major moves. For Friday specifically, the sp500 kicked off Q2 on a strong note, advancing 0.7%, although volumes/conviction levels were very light. The market dipped mid-day (around 1:30pmET) as some of the morning buying abated and investors grew worried about a Greece IMF meeting (the IMF announced mid-day that while its board was briefed on Greece today, it described the update as being part of its normal course of business and not out of the ordinary).


Equities Recap for the week – while the sp500 gained this holiday-shortened week, it was a relatively narrow rally. The biggest contributors to the strength came from the commoditylinked groups – energy advanced ~3.5% while materials were up ~1.7%. The SP500 was up ~7 points as of late on Thurs for the week and 25% of them came from 4 large-cap energy stocks (XOM, CVX, OXY, SLB were the biggest contributors, in that order, to the sp500's advance). A rebound in crude (crude climbed ~6%+ this week) helped drive energy equities (crude finally broke out and set fresh highs this week for the rally). After energy, materials stocks were very strong this week (up ~1.7%), helped also by strength in the underlying metal prices and also by continued talk of higher iron ore/steel prices. The big action occurred outside equities in commodities (for the week, crude up >6%, gat gas up >4%, copper up >5%, gold ~2%, silver ~6%, etc). Outside of the commodity-linked groups, health care also rallied (ending up ~0.8% w/the HMOs up ~1.7%). Tech, which ended Q1 as one of the weakest performing major groups, finished the week off ~60bp and underperforming (within tech however, the semis/SOX outperformed, although had a pretty poor performance on Thurs, opening strong on back of MU's earnings but drifting lower throughout the session). Financials were the big winner of Q1, esp. the banks (the BKX climbed more than 20% in the Q), but the sp500 fin index was flat on the week. Exiting Q1, tech is still the largest sp500 weighting at ~18.7% while the rally in financials has helped that group catch up (to 16.5%). However, there is a large gap between these two groups and the next biggest (historically the

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