Market Equity sectors – Update - Corp. Credit Economics Headlines $SPY

·         SPX: 1169.44, (0.33%) NASDAQ: 2397, (0.53%) Russell 2000 (0.77%)

·         Market Update – very quiet session for the most part; investors main goal was to run out the clock on Q1 w/o a lot of fireworks (sp500 ends off 3.8 points to 1169; range today 1174-1165).  Equities remain resilient, shrugging off the weak ADP # and renewed worries around Greece, as buyers came in on this morning’s weakness.  That said, really not a lot of conviction or volume today; the holidays have thinned out attendance and hurt liquidity (this will prob. be worse tomorrow).  The tape drifted lower at around 2:30pm (no apparent major reason). 

·         Equity sectors – Energy was the only sector to stay in the green other than financials as oil shrugged off a larger than expected inventory build and rallied higher. Oil was pretty much unaffected as it was able to stay above $83 and was even as high as $83.80. Servicers and drillers helped lead energy higher on news that Obama plans to expand offshore drilling in the United States. Financials finished up slightly, led by the banks (BKX index was up 0.3% and ~21% for Q1). Utilities, healthcare, and telecoms were mostly off with the market. Discretionary, staples, industrials, materials, and tech weighed on the market as all were off 0.5-0.8% on the day. Investors will be focused on RIMM/MU for tech and MOS for materials as all three are set to report earnings after the bell.

Market Update ,Commodities;Treasuries: $SPY

OVERVIEW

·         Market Update – another very quiet session; as we exit Q1, sp500 remains in the same range it has spent much of the last couple weeks (high 1160s/low 1170ds); for the day, major indices are approx flat as of noon.  Holidays impacting volume/attendance and hurting liquidity (this will prob. only become worse tomorrow).  Equities opened on the lows following this morning’s sluggish ADP report & some fresh Greece worries, but once again demonstrating resiliency as we rally back to flat heading into the afternoon.  Investors most interested in return preservation through the end of the day and not really doing a whole lot in either direction. 

·         Equity sectors – Energy is the top performer as oil shrugs off a larger than expected inventory build and rallies higher (the drilling announcement from the US also not impacting crude it seems).  Financials also very strong, led higher by the banks (BKX up another ~0.7% and is up ~22% for Q1).  Discretionary and staples are the weakest areas in the market, largely on profit taking. The rest of the spaces are mixed as materials is the only group to eek out a small gain thanks to a weaker dollar. All eyes will be on tech after the close as RIMM/MU are set to report earnings.

·         Best Performing SP500 stocks: GNW, JDSU, DO, RDC, DNR, VIA, FITB, EXPE, RF

·         Weakest performing: SAI, AN, CEPH, LEN, OMC, BIG, RHI, IP, TGT

·         Commodities:  Commodities are mixed this morning. Gold has come off its highs and is trading around $1115, up ~0.8%. Copper has sold off and is trading near its lows down ~0.75%. Natural Gas has weakened since the open, and is trading near its lows down around ~3.90 down ~1.85% Oil sold – off after inventories rose 2.93M barrels; however, it has come off its lows and has moved past $83, up ~0.9%

·         FX: USD (DXY) has weakened throughout the morning, trading near its lows around $81, down ~0.5%.  The dollar has been steadily moving lower all morning and is essentially flat since 8:15am (when the weak ADP report hit).  The dollar is trading near its lows vs. the Euro, down ~0.7%. After selling off overnight, the dollar has traded mostly flat vs. the Pound and is down ~0.7%. The dollar spiked vs. the Yen this morning, and is trading near its highs, up ~0.9%. The Euro has strengthened vs. the Yen throughout the morning and is trading near its highs, up ~1.6%.

·         Corp. Credit: Corp. Credit is underperforming equities – IG 14 is out 1 bp while HY 14 has lost ½ pt.

·         Treasuries: Treasuries have rallied a bit this morning (caught a bid off the weak ADP number) -- the 2s are yielding 104 bps while the 10s are yielding 3.85%. The 2-10 year spread has flattened a bit to 280bps.

·         Greek debt worries back in the headlines; Greek CDS widening but Euro very strong today.  the country's bonds are selling off and CDS is widening (Greek CDS out at ~340bp, well off the ~280 lows from Mar 3). The debt issue priced this Mon continues to trade poorly in the after hours.  Moody's came out and downgraded 5 Greek banks today and there continues to be articles discussing May funding needs and interest costs that are well outside the projections contained in the country’s budget.  From our desk today on a Greek debt auction - "Market participants seem still to be misunderstanding the 2022 tap which was requested by dealers to clear up a series of fails. Somehow  got reported as a poor auction rather than a successful curve management exercise.  The amount issued was simply a reflection of the size of the street short"