Market Update – sp500 ends up ~2.35% and at highs; breaking up through 200day MA

· Market Update – sp500 ends up ~2.35% and at highs; breaking up through 200day MA; SP500 now slightly positive YTD; Nazz +2.7% and R2K +2.5%; broad participation but SOX/semis up 5.5% today, best performing major group in the market.  Stocks finally make it above the 200day MA, w/the sp500 breaking north of 1108 (the first time we have been above the 200day MA since May 19).  All the “right” groups led on the upside (i.e. the most eco sensitive sectors), w/tech, industrials, and materials all up more than 2% (while the more defense safer-haven staples and HC underperform, although each was still up nicely on the day).  Bad news was shrugged off, w/the euro advancing ~1% despite the Moody’s Greece downgrade and the tepid ZEW survey while in the US tech surged nearly 3% (despite the BBY disappointment) and materials climbed 2% (despite the NUE preannouncement).  Even the homebuilders advanced more than 2% (shrugging off the NAHB survey from 10am this morning).  It’s tough to pinpoint a specific catalyst behind the US rally.  There were a couple of European sov debt sales overnight that went off well and received attention (Ireland and Spain), although the big volume of paper comes on Thurs (when longer-maturity Spanish paper prices and France tries to move a slug of debt).  The credit card master trust numbers hit for May and showed further improvement on the delinquency and NCO front (COF, DFS, and AXP were some of the strongest stocks in the whole market today).  The SOX surged more than 5%, helped higher by bullish comments from TSM and UMC overnight (the semis were the best performing group in the whole market).  The financial reconciliation process is moving forward, w/people seeing the “Lincoln Compromise” from Mon as a positive (although the issue remains far from resolved) while the rating agencies (MCO, MHP) have surged in the last 2 sessions after B Frank moved to kill the Franken amendment.  A lot of the “Gulf stocks” (and energy in general) caught a bid as this morning’s House drilling hearings didn’t go as badly as some feared (although most people were watching soccer instead of listening to Waxman) and as investors anticipate a BP escrow fund announcement (HAL, APC, CAM, which are associated w/Deepwater, were all higher, although BP was sluggish following the Fitch downgrade this morning and ahead of Obama tonight).  Despite all these fundamental headlines, the rally today really seems a continuation of the trends that kicked off June 8 (when we tested the lower-end of our trading range at 1040-1050 and bounced).  The tone of the tape has been improving since that test & bounce, w/impressive action in Europe leading the US (the DJ Euro Stoxx 50 is up ~9%+ from its lows in just the last few weeks while the euro has advanced 3.4% from its 6/7 low and today closed above 1.23 for the first time since late May).  European sovereign concerns have abated meaningfully in the last 7 sessions (the ECB meeting/press conf of last week was an important pos. catalyst, along w/a slew of recent OK sov debt sales).  In term of desk color, activity today remained on the quiet side, although things picked up some as we broke up through the 200day late in trading.  There wasn’t a lot of chasing, but people are increasingly acknowledging the strength of the market over the last 1.5 weeks and performance anxiety is starting to set in as we head into Q-end (esp. after the very weak May numbers; given how much de-risking has occurred and how poor May performance has been, there could be a meaningful “chase” that occurs in the near-term, esp. given how barren the calendar is going to be until AA kicks off earnings on Jul 12).  The move today seemed to sneak up on people and many seem skeptical/doubtful of the rally.