· Market Update – despite some intra-day volatility and a brief break into positive territory, it was more of the same today as far as risk assets go – equities for sale, the euro moves lower, CDS widens on European sovereigns, and US TSYs/German bunds rally higher. The SP500 ended -7.7 points/0.65% to 1165, off its worst levels (we hit 1158 in the afternoon) but also well off its highs (we rallied into the green and hit 1176 briefly). Europe remains the market’s big concern and there was nothing overnight that really changed the equation – there remain worries that Greece’s problems aren’t unique to it and in fact are shared by some of its European neighbors (namely Portugal and Spain; Moody’s came out today and put Portugal on watch for a downgrade). The actions taken by European officials to tackle the Greek problem (the IMF/EU bailout package) haven’t calmed the crisis and the fear is may have to be repeated for others. The ECB does have tools to take dramatic action (see below), but for the moment it appears to be set on taking more gradual moves. The euro continues to sink and has sliced through several important technical levels; the major FX crosses remain very volatile and the moves are starting to resemble tech stocks instead of historically staid currencies. For much of the last week, US equities were spectators to what was occurring in Europe, but lately some domestic liquidity measures are starting to deteriorate (see the 3-month FF/LIBOR spread on Bloomberg – USBG1 CRNCY – it has spiked in the last week); the strain of dollar funding markets is one of the reasons some anticipate the ECB and Fed to re-open swap lines. As busy as Europe has seemed, there are a bunch of huge catalysts to come (ECB Thurs, UK vote Thurs, German parliament vote Fri, and more). Despite Europe dominating the headlines, there it a lot else going on. Goldman’s Wealth Management Group held a client call w/CEO Blankfein today although didn’t reveal anything incremental on the situation occurring at the company. There are a slew of amendments being considered in the Senate as the Dodd bill gets debated (voting commenced late on Wed and senators approved a measure to ban taxpayer-funded bailouts; this was widely expected and means more for bank credit than it does equities). On the economics front, there were two positive jobs data points today (the Challenger Survey and the ADP estimate), although ironically the brighter this Fri’s BLS reading is, the more pressure it could place on the euro. Treasuries are catching a meaningful bid (10yr yields fell to a multi-month low), in large part b/c of a flight to quality trade, but also b/c of the US deficit picture is brightening (according to Reuters, the Treasury on Wednesday cut the size of some debt offerings for the first time in three years and reduced its overall planned sales for its upcoming quarterly refunding, citing a growing economy).
· Desk Color - Activity in US equities remain relatively quiet – there was a lot of short covering this morning that caused the rally into the green, but no “real” buying was behind that move. On the positive side, larger long-only vanillas haven’t been sellers over the last few weeks but really haven’t been looking to step in on the weakness either. The buying that is occurring is related to covering or from quicker traders looking for 24-48 hour long exposure.
· Equity sectors: Defensive sectors were the clear outperformers today. The market was led by staples, up 0.4% as investors put money to work in lower risk assets. Healthcare also caught the defensive bid as the only other sector in the green, led by managed care and services. Telecoms followed the same trend, finishing off just 0.2% on strength in Q and S. Financials acted fairly well today, off just 0.4%, thanks to strength in non-life insurers and regional banks. Tech was in line with the tape today, as strength in internet names were offset by weakness in semis and softwares. Utilities lagged the tape a bit today, unable to catch the safety bid on weakness in AES and EQT. Materials ended off 0.75%, lagging the tape on weakness in chemicals and metals as many commodities fell towards or through their 200-day moving averages. Discretionary and industrials were both off close to 1.5% as investors turned on the higher-beta cyclical names in an effort to take risk off the table. Within discretionary, NWS’ earnings hit media hard and it looked like the selling bled into other related groups (like hotels). Energy was the weakest group in the market, falling 1.5% as crude plunged $3 to below $80. The group continues to be for sale over the Gulf spill as estimates for the amount of the spill continue to rise.
· Best Performing sp500 stocks: CLF, EK, ICE, XL, GILD, Q, CAH, MI, ESRX, LXK
· Weakest performing: HOT, MA, NWS, EOG, ADSK, WHR, PCLN
No comments:
Post a Comment