Thursday, August 12, 2010

Market Overview – The Shakers and the Movers-Very few vanilla buyers out there

· The tape started the day on another weak note although some covering lifts prices from their lows; SPX has been hugging the 50day MA for the last 1.5 hrs - more neg. eco #s (Eurozone IP, Greek GDP, US jobless, etc) and neg. earnings (CSCO getting a lot of attention, but KSS also not helping things in retail land) continue to weigh on sentiment.  In terms of trading flows today, the sp500 futures hit their lows just prior to the open but have since bounced and are hanging around the 50day MA (the SP500 cash has followed a similar pattern and is doing its best to hold the 50day MA @ 1085 heading into the afternoon).  Early on, there was a hard press of Emini S&P at 1076 but it wound up holding REALLY well – this prompted some covering (esp. in the most beleagured groups, like the semis).  Nearly all the buying today has been from quicker traders (HFs, etc) covering (esp. in the semis) while vanillas have been very quiet (vanillas haven’t really participated much in the last few days on the downside, a mild positive, but also haven’t been stepping up in size on this sell-off).  Some of that covering is starting to abate as we lift heading into the afternoon (although fresh selling pressure not showing up just yet).  Looking back over the last few weeks, the long-risk trade that had been in place for all of Jul peaked on Mon Aug 2, when the sp500 closed up 2.2% on back of a bunch of better-than-expected Jul PMI/ISM readings from around the world (China, US, Europe).  Since then, we have seen an accumulation of neg. data points (FOMC caution, CSCO remarks, reemergence of European sov fears, etc) and risk has been back for sale.  For Q3 so far, equities are still up 5% but are down ~1.5% in Aug. 

· Equity sectors – Telecom continues to outperform, rising over 1% on a defensive bid on strength in VZ, AMT, PCS, and T. Materials are up over 0.6% on a rally in gold stocks, some base metals, and ferts off the WASDE report. Healthcare is up around 0.15% on strength in HC services. Energy is flattish, outperforming on strength in coals, shipping/tankers, and some solar names an upgrade on JASO by a competitor. Staples are off a little over 0.35%, outperforming on strength in CVS and GIS, although EL weighs on the group after earnings. Financials are down 0.4%, moving lower on weakness in regional banks. Utilities are underperforming a bit despite their defensive nature, moving lower on weakness in EQT and NEE. Discretionary is lagging as well, moving lower on weakness in KSS off earnings. Industrials are off 0.8%, underperforming on weakness in homebuilders, building products, and rails. Tech is the worst sector in the market, falling close to 1.75% following CSCO’s earnings last night, sending the stock down 10%. Semis are also lagging the tape as the SOX drops 1.15%. 

· Best performing sp500 stocks: ODP, HSP, LSI, NEM, MU, CF, PCLN, MEE, MHS, VZ


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