Thursday, May 20, 2010

Market; sell-off in risk assets; China slowing remains a big concern; Looking at the regulatory landscape $SPY

· Market Update – the trend in equities remains the same – fears of a slowing economy are prompting a sell-off in risk assets; the European debt crisis continues to reverberate; regulatory uncertainty remains heightened; volumes/activity VERY quiet; we sliced right through 1100-1102 support/200day and are now off >10% from the highs (in official correction territory); 1065 5/6 intra-day low increasingly being eyed; de-risking trade in place (B Gross on Reuters stating that HFs and other leveraged investors liquiditing positions to preserve capital).  On the growth front, there have been a bunch of retailers signaling a slowing in May sales vs. the pace of Mar and Apr; the official eco readings so far for the month of May have been sluggish, inc. Empire (Mon), jobless claims (today), and Leading Eco Indicators (today); MBA mortgage apps collapsed yesterday and hit lows since '97 (worries housing cooling since expiration of tax credit).  China slowing remains a big concern, although there wasn’t a ton of data overnight (China Construction Bank/CCB today cut its loan growth outlook for '10 b/c of gov't measures being put in place to limit credit).  Looking at the regulatory landscape, there was talk this morning that other countries will follow Germany and implement short restrictions (the thinking being that there can't be such a large discrepency between Germany and the Europe concerning theser rules and that others will have to follow).  In Washington, we are still waiting for the Dodd process to wrap up (the latest indications are that the 2:30pmET vote today will be a success) while the May 6 “flash crash” is prompting calls for new rules and regs (Sen Bunning was on the tape this morning warning that markets remain at risk for a repeat of 5/6 unless emergency measures were put in place). 

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