Thursday, July 22, 2010

Some of the items being cited for the rally today ; Desk color 200 MA 1113 $SPX

Equities are strong out of the gate w/a bunch of positives being cited for the upside action (see below). In terms of desk color, its helpful to view today's rally in context of the move from pre-Bernanke levels yesterday - we were ~1084 on sp cash at 2pmET Wed before Bernanke (so we are up less than 10 points from those levels instead of the headline ~22 point rally). On yesterday afternoon's sell-off, the desk didn’t really see a lot of real inst selling (futures driven and not any real conviction). A lot of the morning bounce today was shorts covering; that said, as we head into 11am, there seems to be some real money starting to be put to work (although not a lot – buyers still reluctant to chase). Technicals still dominating - people watching 1100 and then 1110 as important levels (the 200dayMA is 1113). Keep in mind that credit isn’t performing as well as stocks are today (although it didn’t perform as poorly yesterday) - IG is only 1-2bp tigher today. On the tape right now – Geithner and Pelosi are both saying they want to see the Bush tax cuts lapse for higher-income earners (Dem Sen Conrad yesterday said he would like to see the cuts extended for all – there seems to be a rift developing that will most likely play out in the coming weeks re these tax cuts).
· Some of the items being cited for the rally today: 1) earnings – bunch of decent #s out from a broad group of companies. HC had a few days of sluggish reports earlier this week, but today BAX, STJ, and BMY all higher. Tech helped by EBAY, NOK, QCOM. Within industrials, CAT and MMM also rallying. T is up 3% (VZ comes Fri morning). In the financials, good results from slew of regionals (FITB, HBAN, STI, KEY); 2) China equities continue to make progress - broke above 50day MA overnight for first time since Apr; up for last 4 consecutive sessions and up 5.6% YTD; 3) European eco data – one of the biggest fears has been slowing Euro eco…however, the #s from Europe have been hanging in OK (it has been US #s that have lost some momentum of late); 4) US housing less bad – yesterday some progress in MBA #s while WFC said its mortgage pipeline was up 15% Q/Q; today, existing home sales came in better; 5) Sentiment still skeptical - The percentage of investors who are bullish on U.S. equities decreased to 32.2 percent this week from 39.37 percent the previous week (AAII/Bloomberg); 6) Bernanke – he was asked again today - what else can you do? He gave an answer similar to the Senate yesterday, but today he sounds a bit more confident and forceful – “we are ready to act and we will act if necessary”. Bernanke says the Fed has options left and they have thought out courses of action to take should things deteriorate. On the whole, nothing "new" in his answer….but his tone maybe a bit better than in the Senate yesterday.

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