Thursday, June 3, 2010

Looking Back at the Maket 06.02.10; Volcker Rule; Jobs Number

Market Update – stocks finish up 4 points – after an early attempt at a break-out rally (we stalled out today at 10amET right at the 200day MA), stocks struggled for most of the session, although did finish off their lows and avoided the type of late-day sell-offs that hurt so much on Fri and Mon; while the fact we couldn’t muster a breakout was a disappointment, the sp500 finally strung together two positive consecutive sessions (first time since 4/28-29) and ended higher despite weakness in some critical groups (inc. homebuilders, financials, and materials).  The eco numbers out this week (inc. the ones released this morning) reveal that growth remained on track in the month of May, relieving investors who thought the European debt crisis would have derailed activity.  However, the problems in Europe are still present (FT article late in trading today: “jump in Spanish yields raises fresh fears” while the situation in Hungary appears to be deteriorating as its currency fell today after officials warned of a “Greek-like” crisis) while the Chinese stock market (off 22% YTD and off ~4% on the week alone) is signaling growing investor worries re growth in that country.  Geopolitics is increasingly an overhang, w/NK (again) warning today that war could break out at any time, Israel preparing to intercept another flotilla this weekend, and the UK preparing a vote on Iranian sanctions within the next few days.  The headlines out of Washington aren’t helping – Congress returns from recess next week and will focus on reconciling the Senate and House financial regulatory bills (the banks were for sale today in part b/c of an FT article talking about tougher Volcker Rules being included in the final legislation).  The drillers had a very volatile session, as the Washington Post reported that the MMS had extended the deepwater drilling moratorium to include shallow depths, although the story was later clarified (shallow water drillers will have to resubmit applications to the MMS, which may cause a brief delay in activity, although there won’t be an outright ban on drilling).  BP rallied today off its lows after CEO T Hayward talked about passing a major milestone by sawing off the broken riser and preparing to install a new cap (the company won’t know if this new attempt to staunch the outflow is successful for 12-24 hrs).  There have been a bunch of headlines from Fed officials in the last few days, w/Hoenig’s the most notable (today, Hoenig remarked how he would like to see the Fed Funds at 1% by the end of the summer; given that he has been a dissenter for the last few meetings and is known as being a hawk, his prior comments have focused on changing the language instead of outright immediate hikes).  Investors were pretty noncommittal in both directions today.  Expectations ahead of tomorrow’s jobs number continue to move higher (CNBC was talked about a 700K+ number while Goldman bumped its forecast from +500K to +600K) although a huge contribution from the census (~500K) is skewing the number.  Technically, we failed to break above the important 200day MA (1106 on the sp500 cash), although investors are increasingly viewing the 1040 test-and-bounce of last Tues (5/25) as a bottom (at least on an interim basis

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