Tuesday, May 25, 2010

Market Update after the bell.


· Market Update - stocks stage a relatively impressive rally from their lows of the pre-open (we hit a low of 1035 on the futures at 6amET and end at 1073); there are a bunch of relatively minor headlines that people are citing to account for the strength (see the list below), but it doesn’t seem like there was much conviction in either direction today (i.e. there was no “new news” overnight to account for the weakness and selling pressure was never heavy; on the upside this afternoon, it was more an issue of the sellers pulling back than a rush of buyers jumping into the market); on both  moves (lower today and higher this afternoon), flows were pretty quiet in single stock land.  Traders remain very macro driven w/a bigger focus on broad index activity vs. individual stock performance.  Some of the items aiding equities: 1) holding the Feb lows – while we briefly dropped below the 1044 Feb lows this morning and set a new low for ’10, we quickly bounced back; 2) GS shrs have been strong all day and rallied further into the close, a positive tell for the broader tape; 3) B Frank commenting on the tape that he thinks the Lincoln derivatives amendment is too harsh (Lincoln came out and stood by her legislation following these Frank remarks); 4) Italy’s cabinet approved a multi-billion euro austerity package late in NY trading today (aimed to cut the deficit to sub 3% of GDP by ’12); 5) CNBC’s report that Geithner will push Europe to conduct stress tests of its banks during his visit to the region starting tonight; 6) a weak 2yr auction showing that the risk aversion trade may have hit a near-term peak; 7) the consumer confidence reading this morning for May reveals that the euro debt headlines aren’t derailing the main street recovery yet; 8) Korea – NBC and other media sites downplayed earlier reports that NK was preparing its military for war; 9) Euro holds the May 18/19 lows….rallies off its worst levels along w/equities (there continues to be vague speculation/hope that the ECB will take action of some sort, although given their reluctance to even buy European sovereign debt, it remains unclear whether they have reached the full “nuclear option” stage). 

· Equity sectors: Materials were the best space in the market, up over 1.5% after rallying back sharply on strength in base metals, particularly steels, and a few chemical names. Discretionary was up over 0.75% on strength in auto parts and a few specialty retail stores. Financials were up over 0.75%, led by GS and regional banks. Telecoms were up 0.25% as S moved up 10%, leading the group higher. Energy rallied off its lows to finish just slightly negative as strength in integrateds, services, and drillers was offset by weakness in refiners. Industrials were also off slightly, lagging a bit on a few multis, machinery, and aero names. Tech was off around 0.15% as weakness in software stocks offset strength in the SOX, which was up over 0.5%. Healthcare was off 0.5% on weakness in managed care, services, and medtech/devices. Utilities were off around 0.75% on weakness in NI, OKS, and CMS. Staples was the worst space in the market, falling around 1% on weakness in food and tobacco.

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