Friday, June 25, 2010

Market Update – equities saw a brief relief-rally equities are on pace to decline each day of the week (something that hasn’t happened since ’09 $SPX

German language and ethnicity in central Europ...

Market Update – equities saw a brief relief-rally bounce at the open as fin reg reform got passed through the reconciliation committee, although the strength was pretty quickly sold into (fins are managing to hold onto some of their gains heading into the afternoon) and the broader markets are flattish heading into the afternoon.  While certain items in the bill were “softened” (Volcker + Lincoln), this is a 1500pg+ document (that hasn’t been published yet) that contains a lot of negatives for the financial services industry.  Meanwhile, there have been a slew of sell-side # cuts on the brokers/capital markets banks in the last week, casting a cloud over the upcoming earnings season (which starts the week of Jul 12).  Away from reg reform, news was quiet overnight/this morning.  There were a few pretty strong tech
earnings (ACN, ORCL, TIBX) although the sp500 info tech index is actually underperforming the market today (and not everything was strong last night – RIMM is off 8% today post its results).  Away from stocks, the action in Treasuries + gold is flashing warning signs for anyone buying risk assets (2yr yields are threatening to break to all-time lows while gold continues to tick higher).  In Europe, Greek spreads have widened dramatically this week while on Fri doubt was cast over Romania.  Meanwhile, the markets weren’t all that impressed w/the first European bank stress test results (Austria published overnight), given they didn’t really assume some more drastic scenarios (like a sovereign restructuring); many are hoping that the Spanish, German, French tests run their banks through some more severe scenarios although the whole exercise may wind up hurting more than it helps.  Bigger picture, 4pm can’t come fast enough for a lot of people given the large (~4.3% on the sp500) declines this week (biggest drop as of 11:30am since the week of May 7); equities are on pace to decline each day of the week (something that hasn’t happened since ’09).  For the last two weeks (starting June 8), stocks had managed to pick up some momentum on the upside (we tested + bounced the ~1040-1050 trading range bottom on 6/8 and then broke above the 200day on 6/15), but it has become apparent that the strength was nothing more than a head fake.  The tape remains in a trading range (marked by 1040 on the downside and ~1110 on the upside) and hasn’t been able to break out in either direction.  On the desk today, activity is on the quiet side; a lot of the fin strength is coming via XLFs (vs. single stocks); given we are right in the middle of our range, people aren’t willing to make big stand in either direction
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