· Market Update – US equities pausing a bit to catch their breath following Fri’s melt-up rally (all the major indices are essentially flat on the day). Buyers not chasing stocks higher while sellers are non-existent for the moment – this standoff is causing flattish trading. Shorts remain reluctant to lay out fresh exposure given the resilient trading patterns. The desk is very quiet and this promises to remain the case for much of the week given the dearth of major scheduled events.
· Equity Sectors – mixed action today. Health care, industrials, staples, energy, and materials are all down ~0.3-0.5%. Telecom is the big standout on the upside, rising 1% (S is up 4% and the best performing name in the group). Keep in mind that telecom is a big underperformer (the group is down 8% YTD). Some pos. comments from S this morning at the Raymond James conf helping the group. Consumer discretionary stocks extend their rally from last week (the space was one of the best performing groups last week after same-store-sales came in strong Thurs morning); MCD is up 2.5% after posting strong sales this morning and leading discretionary higher. Tech is up small on the day, led higher by the card networks (MA and V both up ~2%+). Financials are also up small on the day (up ~0.2%), w/AIG/MET leading the group higher post their deal (each up ~4%); C is also an outperformer. Materials are off ~0.4% on the day – while X is higher and outperforming post the Goldman upgrade, AKS, DOW, IP, NEM are all in the red today (AKS is down >3% after Goldman downgraded). Energy is lagging, but this is mostly due to some profit taking in the coal stocks (following their strength on Fri on back of the contract news and the Essar acquisition).
· Best Performing SP500 stocks: S, MET, AIG, SRE, ODP, MCD, FTR, PCS, MA, DRI, BMC, V, GME, YHOO, EMC, MFE, C, TSN, CSCO, YUM
· Weakest performing sp500 stocks: AKS, BTU, CNX, IVZ, CHK, FSLR, DV, CAM, HP, FITB, UNH, PCP, FMC, JDSU, GILD, MEE, CVH, APA, HAL
· Commodities: With the dollar strengthening into mid-day, commodities have weakened from their best levels. Oil has come off its highs and is now at $81.20, down 0.3%. Natural Gas is trading at $4.50, down over 2% today. Gold was trading flat for much of the morning, but sold off and is trading at $1122.50; down 1.2%. Copper is down 0.4%, off its highs.
· FX: USD (DXY) has come off its lows and is now positive (up 0.1%). The dollar has come off its lows vs. the Euro, and is now roughly flat on the day. The dollar has also come off its lows vs. the Pound, and is up 0.5%. The dollar has fluctuated vs. the Yen, and is flat heading into the afternoon. The Euro has come off its highs vs. the Yen, and is also flat.
· Corp. Credit: Corp. Credit is outperforming this morning, as IG spreads have narrowed 2.5bps, and HY spreads have gain 7/32 of a pt.
· Treasuries: As Equities have pulled back a bit, TSY’s are mostly unchanged. The 2s are still yielding 90bps (same as Friday) while the 10s have weakened slightly to 3.7%. The 2-10 year spread has steepened to 2.81bps.
· Sovereign CDS – continued tightening occurring in Europe; Greek spreads tightened dramatically last week and that is continuing today. The successful Greek debt sale of last week, coupled w/the weekend talk of a European IMF and this morning’s Portugal austerity announcement, is all helping sentiment in European gov’t paper. Greek CDS is ~16bp tighter (down to 281 – this was north of 400bp just a few weeks ago). In the Middle East, Dubai CDS has tightened by ~18bp on back of press reports (in the FT and elsewhere) that Dubai World could make a proposal to debt holders that wouldn’t involve any haircuts.
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