Monday, June 28, 2010

Todays Wrap Up

Market Update – stocks stayed within a pretty narrow range and hovered around unchanged for most of the session (never being up or down much more than 4-5 points) on light volumes, providing a prelude to how many think the next two weeks will play out as we head into a news vacuum ahead of the Jul 4 holiday (this weekend) and the Q2 earnings season (starting week of Jul 12).  Aside from a couple of earnings (MU Mon night and Mon Wed morning) and eco numbers (China’s PMIs Wed night and the US BLS figure on Fri), the coming fortnight will be barren of major market catalysts.  On the newswire today, austerity won out over the weekend at the G20, as the Leader’s communiqué echoed the theme from the Finance Minister’s meeting of a few weeks back that the world’s major economies are going to be focused on healing their budget deficits instead of ramping stimulus spending. 

The debate rages on between the two camps and while a P Krugman article in the NYT today condemned the “austerity” camp and talked about how the US was entering a “third depression”, it seems like the budget cutters are winning out (see the UK budget from last week, the failure to pass unemployment stimulus in the US last week, etc).  Financials breathed a sigh of relief w/the passage of Dodd-Frank out of committee last week and the group saw a decent rally on Fri (up 2.8%) although there was little follow-through today given the multitude of uncertainties that still remain outstanding (assuming the bill manages to pass out of the Senate, which isn’t a given after the S Brown comments and the death of Sen Byrd, the issue would then pass into the arms of the nation’s many regulatory agencies for actual implementation; meanwhile, the Basel III liquidity rules are still undefined and remain an overhang for the space while various governments around the world are contemplating new taxes, levies, etc).  While health care stocks saw a decent 1-2 week rally when that legislation was passed, many think the financials won’t be so fortunate as there is still too much up in the air. 

The desk was quiet today and volumes were tepid.  ~1070 is a level being watched and we were able to bounce there at ~10amET this morning, although there still isn’t a lot of real buying/selling occurring in this market (along w/the 1070 test, some people are citing the Supreme Court decision on Sarbanes Oxley as being a pos. for the market).  The euro lagged as traders are still a bit nervous ahead of the expiration of the 12-month tender and the Spanish debt sale (both coming up on Thurs).  While many continue to make the valuation argument (in WSJ, USA Today, CNBC today), seems like people won’t step into the market in a meaningful way until we get: 1) earnings; 2) European bank stress tests.  The trading range of 1040/1050-1110 continues to dictate trading for the time being.

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