Equity sectors: Financials are the worst space in the market $GS $XLF $FAZDiscretionary is also off 1.25% on weakness in autos and IGT

• Equity sectors: Financials are the worst space in the market, falling over 1.25% on weakness pretty much across the board. Industrials are off 1.25% on weakness in homebuilders, airlines, and building products.
• Discretionary is also off 1.25% on weakness in autos and IGT. Energy is  in line with the tape, although refiners are weighing on the group due to lower crack spreads.
• Tech is slightly ahead of the tape as strength in JNPR, NOVL, and ERTS offsets weakness in semis (SOX off over 1.25%). Materials are outperforming a bit on strength in gold stocks and CF, although steels continue to act poorly and paper stocks also weigh on the group. Telecom is off just under 0.5%, outperforming on strength in VZ. Staples are off under 0.2% and outperforming on strength in beverages, DF, and HSY.
• Utilities are flattish on the day, outperforming the market on a defensive bid as investors look to reduce beta. Healthcare is up close to 0.25% on the day, the top space in the market, on strength in biotechs (AGN, GENZ, BIIB, and CELG) on news that Sanofi is looking to acquire a biotech company in the US.

Financials; Not a ton of real money buying on this pullback.; Sentiment remains extremely negative Senate's vote and tomorrow's $XLF

• ·Financials: Following last night's successful House vote on financial reform, the sector underperforms following disappointing Jobless Claims, ISM and Pending Home Sales data. Banks (especially the large caps) are weak in early trading.
• Volumes are heavy on the sell-off and increased dramatically following the 10am economic reports. Likewise, flows remain very active. The 10am number brought out real money sellers and led fast money to press shorts aggressively. Once we held the 1006 technical level, shorts to come in and cover.
• Haven't seen a ton of real money buying on this pullback. We're seeing some institutional support within life insurers and defensively positioned banks, but nowhere else.
• Sentiment remains extremely negative heading into the Senate's vote and tomorrow's June Employement report. As estimates continue to come down for Q2 earnings, it is unclear what positive catalyst (other than valuation arguments) is going to lift the group between now and Q2 report.

Market Update – equities saw a brief relief-rally equities are on pace to decline each day of the week (something that hasn’t happened since ’09 $SPX

Market Update – equities saw a brief relief-rally bounce at the open as fin reg reform got passed through the reconciliation committee, although the strength was pretty quickly sold into (fins are managing to hold onto some of their gains heading into the afternoon) and the broader markets are flattish heading into the afternoon.  While certain items in the bill were “softened” (Volcker + Lincoln), this is a 1500pg+ document (that hasn’t been published yet) that contains a lot of negatives for the financial services industry.  Meanwhile, there have been a slew of sell-side # cuts on the brokers/capital markets banks in the last week, casting a cloud over the upcoming earnings season (which starts the week of Jul 12).  Away from reg reform, news was quiet overnight/this morning.  There were a few pretty strong tech

Yesterday’s Trading 02.17.10

Yesterday’s Trading 02.17.10

· Equity Levels: SP500 ends 1099 (despite a few attempts failed to get up through 1100), up
4.6 points/0.4% on the day; Nazz ends up 0.5% (just shy of the 50day MA – 3 points under);
the R2K ends up 0.6% (remains above its 50day MA).

· Equities had a decent bid to them all session; Helping the tape today: 1) some pos.
headlines out of Europe (the strong Spain debt issue and the Greek Jan budget coming in
better than expected; late in the session, the FT said Greece would attempt to come to market
next week w/a syndicated loan issue to build credibility w/investors); 2) earnings – WFMI
and DE are the highlights in the US while financials stood out overnight (on Tues it was
Barclays and Wed morning ING rallied); 3) eco numbers better-than-expected (housing
starts and IP; also – the Jan budget statement @ 2pmET came in lower/better than expected);
4) Washington headlines – the Treasury reported late in trading that permanent mortgage
modifications jumped 75% M/M in Jan while Obama held a press conf today talking up the
benefits of the stimulus program this morning (and the WSJ noted that the bulk of the
infrastructure stimulus is still to come).

· Desk color - Despite the modest rally, volumes/attendance/conviction levels all remain on the
light side and the SP500 failed to sustain a move north of the technically important 1100
level. That said, stocks were able to shrug off a strong dollar rally (the DXY closes up 0.9%
and more than makes up for Tues’ weakness) and some hawkish Fed headlines (the minutes
were as expected although the line about “several” Fed officials wanting asset sales in the
near-term spooked some people). A lot of the flow continues to come from short-term
focused HFs while larger vanillas haven’t done a whole lot in the last 72 trading hours.
Continue to see a sellers strike although a lot of the aggressive short covering is starting to
abate (the covering really kicked off after we failed to follow through on the downside back
on 2/5 but has been petering out in the last couple sessions). Longs didn’t have enough to
break through 1100 as real vanilla buyers on the sidelines.

· Equity Sectors – similar to mid-day, weakness in the commodity-linked stocks on back of
the stronger buck (this group saw some profit taking following big ramps during Tues’
session; despite the dollar more than recouping Tues’ sell-off, materials/energy stocks only
pulled back small today). Financials trade inline w/the sp500 helped by large banks (C,
BAC), life insurance (off the Morgan Stanley sector upgrade), and REITs (continued M&A
optimism) while the regional banks were weak. Health care led the market for the whole
session (the HMOs in particular had a bid to them today). SP500 staples index was one of the
best performing groups, although a lot of this was on back of WFMI (which advanced double
digit % after earnings). Capital Goods outperformed on back of DE’s earnings.

· Best Performing SP500 stocks (from Bloomberg): WFMI, SNDK, IRM, DE, BSX, THC,
DPS, GILD, GT, CFN

· Weakest performing sp500 stocks (from Bloomberg): FMC, NBR, RF, TSO, CBG, MOT,
IGT, AIG, JDSU, SRE

2.18.10 Today’s Top Stories & Catalysts

Today’s Top Stories & Catalysts

· Focus for the most part remains on Europe with little out of Asia (BoJ decision pretty
much as expected and HK’s unemployment rate was unchanged) as China remaining closed.
On the Greek front, no major developments to speak of overnight (to watch coming up
though: the FT is reporting that Greece may test the waters next week w/a bond offering and
the country is expected to deliver more information by Fri 2/19 on its debt swap deals).
There were a handful of earnings out in Europe - Daimler is prob. the standout, w/the
stock off ~7% after reporting disappointing numbers and proposing a dividend cut. SocGen is
down 5% post its earnings (first disappointing European financial report this week after very
strong Barclays and ING #s) although other European financials aren't really getting hit in
sympathy. In London, BT is the weakest stock in the FTSE following a ratings downgrade
from S&P (there are continued worries about the co's pension exposure). On the eco front,
the UK posted a budget deficit for January vs. expectations for a surplus, putting UK
sovereign debt under some pressure (FT).

· tech update from Wed night - big night of earnings - on the whole numbers/trends/mgmt
commentary all remain positive, although inline w/what we heard from companies back in Jul
and also inline w/CSCO's Chambers a couple weeks back. Trends were robust in the CQ4,
trends remained strong in Jan, the CQ1 is shaping up to be better-than-seasonal for many endmarkets,
and mgmt tone remains sanguine on the outlook. The next big catalyst for tech will
be the sell-side conference season and the mid-Q updates - Goldman has a conf next week
and Morgan Stanley the week after - these forums will give companies a chance to update on
the status of Q1 (i.e. are things still pacing better-than-seasonal; how is the outlook for June
shaping up; etc). Also - we will start getting formal mid-Q updates in early Mar. Some
tidbits from Wed night: 1) HPQ tone remains positive on demand; PCs prob. showed biggest
upside (revs much better than St), which isn't surprising given what others have said/reported
(MSFT, INTC, etc); HPQ mgmt said it was component constrained (similar to what others,
inc. CSCO, have said); 2) AMAT beat and raised; tone was positive; one analyst on the call
noted that backing into CH2:10 guidance based on mgmt's color implies a down back-half (if
I take the 25% revenue growth you gave in the April quarter, 100% year on year growth, I
think you are actually talking about a 50% revenue decline from the April quarter level into
July and October"); that said AMAT was sanguine on the outlook looking into ’11; 3) NVDA
said it remained capacity constrained throughout the Q and will remain so into the Apr-end Q
(NVDA said this cost them a couple hundred million in revs in the Q and that they would
have guided for higher Apr revs). Big to watch tonight in techland - DELL and IM earnings.

· Gold sales - IMF to Begin On-Market Sales of Gold – hit after the US close on Wed – IMF
said Wed night it will soon kick off the second phase of its gold sales process. The first
phase was set aside exclusively for off-market sales to official holders. The total amount
remaining to be sold is 191.3 metric tons. In accordance with the priority of avoiding
disruption of the gold market, the on-market sales will be conducted in a phased manner over
time.

· China & US tensions growing on economic front - US officials increasingly view the
Chinese currency’s artificially low peg as a threat to worldwide economic stability; the US
plans to press Chinese officials in the coming months to take action and strengthen the yuan.
In addition, US multinational corporations are becoming increasingly vocal about what they
view as anti-competitive practices on the part of the Chinese – WSJ

· Muni market – cities weigh Chapt 9 filings – the WSJ says municipalities around the
country are considering whether to file for Chpt 9 bankruptcy protection; also on the muni
front: States see ~$1T benefits “sinkhole” (there is a massive gap between what states have
promised in pensions, health care, and other benefits, and the available resources)
· Retail earnings season kicks off – WMT earnings due to hit @ 7amET this morning; JCP
comes Fri morning.

· US bank lending falls at fastest rate in history – bank lending in the US has contracted so far in ’10 at the fastest rate in history, raising worries that the Fed is withdrawing its
emergency stimulus measures too early. The M3 broad money supply has been contracting at
a rate of 5.6pc over the last three months. This signals future deflation. London Telegraph.

· Earnings season recap – from JPMorgan’s E Beinstein - Roughly 75% of the non-financial companies in our High Grade bond index have filed their 4Q09 reports. This preliminary data suggests credit metrics continue to improve, but the complexion of the improvement has changed. Recall, trends in 3Q09 credit metrics were positive across almost all sectors. These trends continue in 4Q09, but with a different tone. While companies continue to accumulate cash, the pace is slower. With cost cutting largely finished, profit margins have ticked down as companies must spend more to grow. While leverage has likely peaked earlier in 2009, its reduction will likely be gradual.

Whole Foods We Now Love Austin for 2 Reasons; Upgrade to Overweight

We are upgrading Whole Foods to Overweight from Neutral and
increasing our price target to $39 from $32. As we highlighted in our long
trading call yesterday, “Whole Foods: Recipe for a Squeeze, Buyers
Ahead of 1Q Print,” we expected a combination of positive ID sales
(+2.5%) and store contribution margin expansion (73 bps of expansion, ex.
LIFO) to lead to a clean EPS beat ($0.06 ahead of consensus) but were
concerned about the sustainability of emerging sales trends longer term.
With the strong ID sales and margin results, we are now more confident
that WFMI's emerging sales growth trends have been validated and feel an
OW rating is merited. Moreover, in line with our new Bull’s-Eye
investment strategy that we’ve adopted for 2010 (see note out today,
“Broadlines Retailing: Barbell Out, Bull's-Eye In; 2010 Handbook &
4Q Look”), WFMI is demonstrating early signs of two of the three
attributes we’re looking for, specifically: identifiable sales catalysts (via
trade-up and value focus) and strong top-line momentum (with traffic the
key driver). In addition, the stock already fully embodies the third
attribute, out-of-favor opportunities (with a ~10% short interest ratio).
While WFMI will likely open higher tomorrow, we think management has
left room for additional EPS upside – hence our upgrade.

full report here

Citibank- Goldman Sachs

We have removed the NR designation from Citigroup shares. We reinstate
a Neutral rating on Citigroup with a 12-month price target of $3.50. The
first phase of Citigroup’s restructuring is now complete with capital and
liquidity levels higher than at its peers. With leverage significantly
reduced, the “trade to tangible book” looks tempting. That said, we
reinstate our rating on Citigroup at Neutral as (1) near-term earnings
power remains weak, (2) the stock offers less “provision leverage” than
pure US plays, and (3) The government stake likely caps near term upside.

FULL REPORT HERE

Cashin’s Comments AN ENCORE PRESENTATION 02.16.10

Cashin’s Comments

On this day (-1) in 1922, a 28 year old kid named Sam Hammett resigned from the
Pinkerton Detective Agency. The Pinkerton's were the most famous detective agency
in the world. Begun over 60 years earlier, Alan Pinkerton's firm was the model for the
U.S. Secret Service. And, when Pinkerton took his tactics private, he chose as his logo
an open and possibly all-seeing eye. Thus the Public adopted the image of a nonpolice
detective as a "private eye."

Sam Hammett resigned from what he thought had become a bureaucratic form of
investigation. He liked free style - lone wolf. So he left the firm, dropped his first
name and began to write about the private eye he always dreamed he'd be.
So Sam Hammett became the writer Dashiel Hammett and invented Sam Spade (The
Maltese Falcon) as well as Nick Charles (The Thin Man) and set the tone of hard
boiled, hard drinking shamuses that would captivate Americans for half a century.

To celebrate, tell Vilma to park the gum, and tell the skirt on the phone that a partner
is a partner not a prom date. And if a messenger arrives with a newspaper-wrapped
dingus - send it, along with most of whatever else you have, to the I.R.S.

Traders could have used a detective to tell them what was going on yesterday last
week. The markets puzzled about what was the solution to the Greek question and
what was going on in China. That puzzling led to some volatile trading.

Following The Bouncing Buck Continues But Causes Confusion – Stocks began
Friday’s session deep in the hole. Pundits noted another move to tighten by China.
Of nearly equal importance was the noticeable lack of detail on the presumed Greek
“rescue package”. Traders began to wonder if there really was a plan.

Those two developments gave a boost to the dollar. That, in turn, sent gold and oil
sharply lower, matching the opening stock selloff.

Around 10:00, the greenback rally paused. Less threatened, stocks, gold and oil
responded by churning sideways. As noon approached, the dollar index came off the
highs and, in yet one more Pavlovian reaction, stocks, oil and gold cut their losses in
response.

Then, around 1:00, the Dollar Index (DXY) began to move up toward the morning
highs. As if a bell had rung – stocks, oil, and gold headed back down. Shortly after
2:00, the process was reversed again. In the final 45 minutes, they staged a minor
reversal of the previous reversal.

The dominance of the dollar was so evident that I was stunned from time to time to
see brokers getting calls from trading desks inquiring “what turned the market?”
Talk about not seeing the forest for the trees.

The Dow closed two-thirds off the lows. That allowed the first up week in the last
five. Not quite a resounding victory for the bulls, but a welcome respite at least.
The Week Ahead – Based upon published data, the watercooler wizards are
guessing that this week’s calendar may look something like this:
In the abbreviated week, it is likely that initial claims and housing data will get much
attention. If the FOMC minutes are
not too heavily laundered, they might tell us if Hoenig is a lone hawk.
Cocktail Napkin Charting – In Friday’s Comments, we wrote that the napkins suggested support in the S&P was “way
down around 1058/1063”. The sharp opening selloff took the S&P to an intra-day low of 1062.97 before they circled the
wagons. For today, we’ll stick with the 1058/1063 support. Resistance looks like 1083/1088 and then 1093/1097.
China Watch – Over the weekend, there was some speculation that China is so concerned about a lending bubble and
potential inflation that they might allow (cause) their currency to appreciate. If so, authorities must be really concerned.

On another note, Andy Lees passed along a warning from China’s Agriculture University. They claim the over-use of nitrogen fertilizers has so poisoned the soil in South China that nothing will grow in it. The year of food shortages?

Greece And The Euro – The Euro is firming this morning helping gold, oil and stock futures.

The European ministers are meeting amid a growing sense that failure is not an option. Additionally, polls show that a majority of the Greek populace believe austerity measures are necessary and, likely, overdue. That offers some hope of reform without street backlash.

Sunspots Before My Eyes – Sunspot activity perked up markedly last week. In fact, the numbers returned to almost
normal levels. The sunspot numbers for February 4th through the 10th were: 11, 22, 30, 51, 71, 63 and 55. We haven’t
seen a number as large as 71 since spring of 2006.
To keep things in perspective, lets again review the average daily sunspot numbers in prior years. For the period from 1999
through 2009, the average daily sunspot numbers were 136.3; 173; 170.3; 176.6; 109.2; 68.6; 48.9; 26.1; 12.8; 4.7 and 5.
Let’s not put away that sweater just yet.

Consensus – It’s still all about the dollar (DXY). The above noted hopes for some resolution to the Greek crisis have gold, oil and stock futures all doing better. In 17 of the last 20 weeks, we’ve begun with a rally. Follow the bouncing buck.

Stay very, very nimble.

Trivia Corner
Answer - The only letter not used in spelling the names of all 50 states is "Q".
Today’s Question – Two term presidencies are not as common as you think. We’ve only had three back to back two termers once in our history. Who were they?

Adding Bank of America (BAC) to the U.S. Focus List

Investment Thesis: The IPC believes the risk/reward proposition on BAC’s stock is very attractive at current levels as we think BAC has many under-appreciated earnings levers and looks extremely cheap at 6x our estimated normalized earnings. We believe 2010 will be an important inflection point in terms of EPS and book value growth. Much of this growth will be driven by improving credit quality in 2010. This process has already begun as growth in non-accruals has improved for three quarters. We also see the recent TARP repayment as removing a significant FULL REPORT HERE
overhang from the stock. Also look here <<------ fill out the form if you like free research
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