Sunday, May 30, 2010

Week In Review May 28; Stocks were able to (barely) pull themselves off the mat this week $SPY

Stocks were able to (barely) pull themselves off the mat this week, climbing 0.16%
(although we recouped just a fraction of last week’s 4.2% drubbing). Despite a lot of
volatility (imagesthe sp500 fell 1.3% on Mon and surged 3.3% on Thurs before dropping 1.24% on
Fri), the newsflow this week was relatively quiet w/technicals and macro headlines  dominating more than single stock stories. Aside from an ugly close on Wed, there were  some positive signs this week. On a technical basis, we encouragingly were able to hold the  important 1040 level on Tues morning (importantly on Tues, we opened at the lows and hit  1040 early in the day before staging an impressive rally higher to end the session essentially
flat; at the lows on Tues, the sp500 was down ~3% for the day). The desk noted that sellers  exhibited signs of exhaustion on Tues and that was prob. the biggest factor that permitted  equities to lift. The 1040 test gave some comfort to buyers to step in (inc. long-only vanillas)  and prompted aggressive covering by some of the quicker HFs. Even Fri’s action was  positive – while the tape wasn’t able to add to Thurs’ strong move, it did shrug off the late  session Spain downgrade and finished off only a few points. Away from stocks, the  relatively tepid demand at this week’s TSY auctions (esp. the 2yr) and at a German bund  auction signaled that the market’s appetite for riskless assets has its limits. That said, buyers  aren’t chasing stocks to the upside and the sp500 hasn’t strung together 2 back-to-back  positive sessions since 4/29-28. Perhaps the biggest tailwind for stocks this week was the  relatively slow newsflow – there weren’t major earnings releases (and the ones that did hit,
like NTAP, were strong) and the next economics release cycle doesn’t start until next week
(when we get the first of the May numbers). Congress was quiet (the Senate already passed
the Dodd bill and the reconciliation process doesn’t kick-off for a few weeks) and while
Europe continues to produce the lions share of the market’s major news items, there wasn’t a
ton really incremental from the region this week.

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