Market Update – Equity Sectors -Sovereigns –Treasuries $GS $SPY

Overview:

·         Market Update – equities maintain their strength into the close and finish the day at their best levels (sp ends up 0.7%/9 points to 1159.5; both R2K and Nazz end up ~0.7% as well).  The European sovereign debt overhang continues to lift (S&P’s action on Greece today being the latest positive) while the Fed release gave investors the best of both worlds (growth outlook upgraded slightly while language on rates remained unchanged).  There remains a firm bid underneath the tape for equities, both from longs and shorts covering, although the bulk of activity occurring from short-term trader-focused investors (vs. larger long-only MFs, which remain relatively inactive).  Volumes remain on the light side (something that SCHW said on Fri and AMTD just said after the close today – their DARTs fell mid-teens % M/M and both issued a small profit warning for the current Mar-end Q) although performance anxiety continues to ratchet up as stocks hit new highs daily (the big break-outs in super-caps like GE, which ended up 4.5% today and is up 10% in the last 3 sessions, and INTC, which closed up 4% and hit fresh highs, is adding to the performance anxiety). 

·         Equity Sectors – broad based strength today; financials, industrials, utilities, and materials all close up >1%; energy and tech ended up just under 1%.  Tech was led higher by the semis/SOX, which closed up >2.5% (although the SOX still hasn’t hit a new high for this rally; that said, the biggest semiconductor of all, INTC, made an important technical break-out today).  Financials are being led still by the banks (esp. the regionals).  The SP500 capital goods index ended up >1.3%, w/GE helping the most GE closed up 4.5% and hits the highest level since late ’08).  Materials up 1.5%, helped by the weaker dollar and eco growth optimism. 

·         Best Performing SP500 stocks (from Bloomberg): HOG, AMD, MOT, CLF, MU, LSI, ZION, MWW, GE, WYNN

·         Weakest performing sp500 stocks (from Bloomberg): S, WU, EK, WYN, TDC, AIG, SWN, MDT, GT, DVN

·         Sovereigns – Europe outlook brightens - on Mon, the Moody’s comments around the US/UK AAA ratings being at risk received a lot of attention, but Moody’s hosted a call this morning and clarifying their remarks, stating that no AAA sovereign credit faces near-term risk; Moody’s added that Spain, which has been a big concern among investors, remains well within AAA parameters.  Separately, S&P this morning came out and took Greece off watch negative.  Despite these developments today, European CDS didn’t really move all that much (very slight tightening). 

·         China – rhetoric around the China yuan continues to heat up; Sen Schumer launched a bipartisan bill today that would impose tariffs on certain Chinese goods unless the country took action on its currency.  Schumer said there was enough support to pass the measure through the Senate.  The next major date to watch will be the Treasury’s semi-annual FX report (due on Apr 15) and whether it will label China a manipulator of its currency. 

·         Commodities: despite the dollar sliding a bit further in the afternoon post the Fed, commodities ended near their mid-day levels (still up on the day). Oil finished near its highs of ~$81.80, up 2.5%. Natural Gas came off its lows to finish around $4.35, down 0.9%. Gold traded mostly flat into the afternoon, near its highs of ~$1127.30, up ~2%. Copper also traded flat in the afternoon and ended near its highs up ~1.9%.

·         FX: USD (DXY) continues to weaken into the close, ending the day near its lows around $79.70, down 0.7% (dollar gets hit on the more dovish Fed statement). The dollar finished nears its lows vs. the Euro and the Pound, down ~0.75% and ~1.3% respectively. The dollar sold off vs. the Yen, to finish down ~0.3%. The Euro traded mostly flat vs. the Yen, finishing up ~0.44%

·         Corp. Credit:  Corp. Credit strengthened in the afternoon although lagged very slightly vs. the move in stocks.  IG spreads finished tightening 1bp while HY gained a bit to 3/8 of a pt.

·         Treasuries: Treasuries continued to rally after the Fed meeting, with 2s yielding .91bps. The 10s also rallied to yield 3.65%; the 2-10 year spread was unchanged at 2.74bps.