· Market Update – stocks meandered around the flat-line for much of the session before breaking into the green during the last hour of trading and ending a few points higher. The SP500 closed at a new high for this rally (we ended at 1150.24 today vs. the prior closing high of 1150.23 on 1/19; intra-day, the 1/19 high at 1150.45 still stands) and there remains an underlying bid to the tape. Transports, banks, R2K, and Nazz all set fresh highs for this rally. Stocks have been very resilient and it has been hard to sustain any meaningful sell-off (since bottoming on 2/5, the sp500 has only closed lower for two consecutive days once and has only been down more than 1% in a single day once). The corporate events calendar was pretty quiet today (we are at the trough of the earnings cycle, w/AA kicking off the Q1 season on 4/12) while there wasn’t a lot on the economics front either (the US jobless claims remain stubbornly high and China’s inflation #s are raising market worries that the country may take further tightening actions, like tightening up RRRs again). There remains a dearth of selling pressure, which is allowing even small amounts of buying to elevate the tape (shorts are using any dip to cover while longs are buying on any weakness). The buyers aren’t aggressive or panicked, but performance anxiety is starting to set in, esp. as we head into the end of the Q in a couple weeks (the anxiety is prob. most acute in the banks – the BKX is up 19% in QTD). Volumes are picking up, but this is still mostly due to the surge in single digit names like C (C has been averaging north of 1B shrs by itself for the last few sessions).
· Equity Sectors – stocks rallied into the close, led higher by the financials. The SP500 financials end up ~0.9% (led by the banks – the BKX finishes up 1.6% and is up now ~5% on the week and 19%+ YTD). This is the same trend that has been in place for the last couple weeks now as buyers gravitate to the banks (recall the BKX made a large technical break-out on Wed). Tech ended inline w/the broader sp500 despite the SOX ending off small (although the semis did rally off their worst levels). Health care, industrials, materials, and telecoms were all about inline w/the sp500. Within industrials, the transports finish up 0.5% and hit yet another new high for this rally (capital goods/machinery stocks were more sluggish and ended the day flat). Energy and staples were both flat (energy technically was down 0.02% on the day and was the weakest of the major sub-groups). SWN, TSO, EOG, RDC, SII all finished down 1% and weighed on energy. XOM ended flat (it held an analyst meeting today).
· Best Performing SP500 stocks: GME, C, ZION, KEY, DPS, DFS, CVH, AET, DVA, AES
· Weakest performing sp500 stocks: NSM, AIG, ZMH, ADI, CF, ADM, NVDA, TXN, TER
· Commodities: As the dollar sold off, commodities strengthened into the afternoon, with the exception of Natural Gas (due to the storage report.) Oil continued to come off its morning lows and finished near its highs around $82.80, up about 0.15%. After selling off in the morning, Natural Gas traded flat and finished around $4.45, down ~2.5%. Gold closed today near its highs at $1109.10, up 0.1%. Copper finished up ~0.75%, again near its highs.
· FX: USD (DXY) continued to weaken in the afternoon finishing near its lows around $80.25, down ~0.2%. The dollar finished nears its lows vs. the Euro and vs. the Pound, down 0.15% and 0.5% respectively. The dollar traded relatively flat vs. the Yen in the afternoon, to finish up ~0.05%. The Euro finished near its highs vs. the Yen, up 0.2%.
· Corp. Credit: Corp Credit tightened/rallied along w/stocks into the close although on an absolute basis today, it underperformed equities; IG spreads finished the day widening 0.5bps, while HY ended up 1/8 of a point (although since the 2/5 sp bottom, IG has been a big outperformer).
· Treasuries: 10s and 30s caught a bid in the afternoon following the strong 30yr auction; however, the 2s remained for sale (the weakness in the 2s ahead of this Tues’ Fed meeting could be sending signals that the market is anticipating a modest change in Fed tone towards a more hawkish view). 10s rallied to yield 3.73% (vs. 3.75% in the morning). The 2-10 year spread flattened pretty significantly to 2.77bps (5bp flatter on the day).
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