Friday, September 10, 2010

Market Update 1:10pm

· Market Update – stocks drifting back towards the unchanged line as we head into the afternoon.  For the week, the SP500 is about flat although is still sitting on nice gains for the broader month.  There wasn’t a ton of incremental news out overnight – the China trade figures are being called better-than-expected (imports v strong while exports were inline) and importantly Chinese officials are downplaying market speculation of a rate hike coming this weekend (which had been a fear late yesterday and early this morning).  In the US, the news was actually disappointing – the SOX is off another 2% today (its down 3.5%+ on the week, by far the worst performing group) after NSM disappointed last night (this semi weakness is starting to drag on the broader tape as we head into the afternoon).  The Basel capital rules meeting this weekend is being viewed as an overall positive – while it could prompt some capital raises out of Europe (see DB), for the US it may spark a return of capital by some banks (RBC has a note this morning discussing how US banks could ramp up dividends once there is clarity on the capital front).  Washington is being looked at as a net positive at this point as investors anticipate victories for the GOP on Nov 2 (the consensus thinking has the Republicans recapturing the House but not the Senate); the Obama press conf today (started at 11amET) didn’t reveal too much incremental (as far as investors are concerned) and nothing is seen getting done until at least after the mid-terms (the fact the Obama press conf hasn’t contained any incremental announcements could be contributing to the sluggish stock trading into the afternoon).  Trading is still pretty quiet (due to the holidays) and we are still within the same technical range that has confined this market for months now (we tested and held the critical 1040 level a couple wks back and now the 200day MA on the upside is being watched at 1116).  As we head into the afternoon, there is the potential for some profit taking due to headline risks around Sun’s Basel gathering (also the semis/SOX really are showing no signs of bouncing, falling ~2% as of noon – at some point the semis and broader tape will have to reconcile themselves). 

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