Thursday, July 22, 2010

$SPX Market Update from yesterday what was the what when and where

Market Update – the sp500 trades flattish from 9:45amET until 2pm before selling off ~18 points between 2-3pmET on back of Bernanke and then trading flattish from 3pmET into the close (ending at 1069, dwn ~14 points). Stocks were trading poorly since before the open (the sp500 futures peaked @ ~9amET); investors sensed something was wrong from the start of the day when the broader tape failed to respond on the upside to some decent reports (like AAPL, MS, WFC, UTX, ETN). Rather than bring out incremental buyers, the desk saw profit taking on early strength (i.e. see the intra-day charts of WFC, AAPL, UTX, etc – all opened at their highs and drifted lower throughout the day). The big event of the day came at 2pmET, when the Bernanke Humphrey-Hawkins testimony hit the tape and weighed hard on equities (normally, this comes at 10amET, but the hearing was pushed back to accommodate the president’s fin reg reform signing ceremony). The Fed chairman’s tone/commentary was pretty consistent w/the recent FOMC minutes and also inline w/remarks from other Fed officials in the last few weeks (i.e. Lacker, etc). However, over the past month, there have been a series of articles (in the WSJ, NYT, FT, and elsewhere) talking about how the Fed was considering its options in the event of a steeper eco downturn and/or outright deflation. Tues morning, the FT published the following article “Fed eyes looser monetary policy” and during trading yesterday there was speculation that Bernanke would unveil some kind of incremental easing policy during his testimony today. During his prepared remarks, the Fed chairman actually spent more time discussing how the extraordinary policy initiatives were going to be withdrawn instead of talking about incremental options; in a response to a question from Sen Shelby, Bernanke emphasized that policy already is very simulative and that a full discussion hasn’t even occurred yet at the Fed re future accommodating options. The S&P dipped nearly 20 points after the testimony hit @ 2pmET before finding a bottom at 1065 (1060 is being watched as an important level). The move was all futures/e-mini driven – the cash desk was pretty quiet on the move lower (i.e. didn’t seem to be a lot of conviction behind the drop). Looking bigger picture, the tape has been pretty tired now for the last week. The SP peaked on Tues 7/13 and has been flat-to-down ever since; earnings on the whole are “beating expectations” in terms of EPS upside vs. the First Call consensus, but investors haven’t been so impressed for the most part.

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