Equity sectors';Market Update;Desk color; Relief around FASB accounting $bac $spy

OVERVIEW

· Market Update – futures have been ticking higher all morning (really since 1amET), steadily strengthening as we head into the afternoon; 1095 proving tough resistance heading into the afternoon.  A bunch of items being cited for the strength in stocks today (biggest reasons prob. the China denial along w/technical progress and some month-end allocation ahead of a holiday weekend): 1) China and Kuwait denying story that they are considering adjusting their Eurobond holdings; 2) Earnings taken well – NTAP, COST, TIF; 3) tech optimism – in addition to NTAP, a bunch of other companies (inc. Samsung and Acer) have said not seeing slowing in Europe; 4) Spec weaker euro aiding European exports (couple officials from Europe have signaled that the weaker euro is helping the region); 5) China backing off tightening measures (PBOC set to make its first net injection of funds into the banking system this week since February per RTRS); 6) Korean tensions easing (Newsweek says NK trying to calm the situation); 7) BP “top kill” successful; 8) Spain’s parliament approving austerity measures; 9) Indications Greek deposits stabilizing and actually rising again after outflows for last months (per Bloomberg); 10) Relief around FASB accounting – changes not until ’13 at earliest and all the information is disclosed already (the numbers are moving from footnotes and into the statements); also helping banks the fact that a bunch of HF managers were pos. on the group at a conf Wed and DB’s comments this morning that strong trends continued in Apr from Q1; 11) Reuters reporting that House working to soften proposed carry interest tax; 12) steel worries abating following Nippon price hike; 13) month-end asset allocation (i.e. given the strength in TSYs in May and underperformance in equities, some may need to rebalance and purchase stocks).

· Desk color – flows on the quiet side…will prob. only get worse as we head into holiday weekend (US and UK are off on Mon); buyers and sellers seem tired; things remain very macro/technical basis; correlations again high (i.e. everything rallying today).  Financials, tech, industrials, discretionary, energy, materials all up ~2-3%.

· Technicals – we are holding above the key 1090 level (on cash); next big level is 1095 and then the 200day MA @ 1104. 

· Equity sectors: Energy is the strongest space in the market, rising over 3% on strength in crude and following news that BP successfully plugged the leaking oil well in the Gulf. Financials are up 3% on strength across the board, particularly in credit sensitive names following news that the FASB acctg standards won’t be as restrictive as once thought. Tech is up close to 3%, led by the SOX which is up 4%. Materials are mostly in line with the tape on a sharp rise in metals as their commodities move higher. Industrials are in line with the tape as well, led higher by high-beta machinery names and engine makers. Discretionary is up with the tape on strength in hotels and gaming companies. Telecoms are up just under 2%, led by S which is bouncing back after lagging yesterday. Staples are up 1.5% and lagging the tape as strength in tobacco is offset on weakness in HNZ following weak guidance. Utilities are up 1.25% across the board, but underperforming as investors move money into higher beta assets given the market rally. Healthcare is also up 1.25%, but lagging the tape on weakness in GENZ.