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TODAY’S S&P 500 SET-UP - December 22, 2010

As we look at today’s set up for the S&P 500, the range is 14 points or -1.00% downside to 1242 and 0.11% upside to 1256.  Equity futures are trading mixed to fair value following Tuesday's largely uneventful session, which saw the Dow close above the 11,500 level as December's rally continues to free wheel into year end.

A heady mixture of fiscal stimuli, M&A, solid corporate earnings and year end window dressing appear to be behind the continued support for the market, although volumes remain very low.

After the close, Nike (NKE) reported Q2 earnings that broadly met analysts’ forecasts but the shares fell in after hours trading after it guided to roughly 150 bps of margin pressure over the next 2 quarters due to cost inflation. Today's macro highlights include; Q3 GDP (second revision) and Nov Existing Home Sales

  • Aeropostale (ARO) appointed Marc D. Miller as CFO
  • Humana (HUM) sees 2011 consolidated EPS $5.45-$5.65, says rev. should increase $800m from Concentra deal
  • Nike (NKE) sees 2Q brand futures orders up 11% ex-FX, vs est. up 11.6%
  • Progress Software (PRGS) sees 1Q EPS 40c-45c vs est. 36c
  • Red Hat (RHT) reported 3Q adj. EPS 20c vs est. 20c
  • Scientific Games (SGMS) got a contract to supply tickets and services to De Lotto, in the Netherlands
  • Tibco Software (TIBX) reported 4Q adj. EPS 31c vs est. 28c
  • Walter Energy (WLT) bought the assets of Mobile River Terminal; terms not disclosed
  • Xilinx (XLNX) cut Dec. Q rev. forecast to down 7%-9% Q/q, implies $563.9m-$576.3m vs est. $606.9m

PERFORMANCE

  • One day: Dow +0.48%, S&P +0.60%, Nasdaq +0.68%, Russell 2000 +1.05%
  • Month-to-date: Dow +4.79%, S&P +6.27%, Nasdaq +6.78%, Russell +8.74%
  • Quarter-to-date: Dow +6.91%, S&P +9.94%, Nasdaq +12.62%, Russell +16.92%
  • Year-to-date: Dow +10.60%, S&P +12.51%, Nasdaq +17.56%, Russell +26.4%
  • Sector Performance: Financials +1.6%, Materials +1%, Energy +0.9%, Industrials +0.7%. Tech +0.6%, Consumer Disc +0.5%, Utilities (0.05%), Healthcare (0.2%), Consumer Spls (0.4%)            

 EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 1156 (+1201)  
  • VOLUME: NYSE 810.52 (-2.32%)
  • VIX:  16.49 +0.49% YTD PERFORMANCE: -23.94%
  • SPX PUT/CALL RATIO: 1.54 from 1.92 (-19.67%)

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 17.50 -0.101 (-0.576%)
  • 3-MONTH T-BILL YIELD: 0.14%  
  • YIELD CURVE: 2.72 from 2.74

COMMODITY/GROWTH EXPECTATION:

  • CRB: 326.80 +0.78%
  • Oil: 89.82 +0.50%
  • COPPER: 427.60 +1.66%
  • GOLD: 1,387.97.50 +0.11%

CURRENCIES:

  • EURO: 1.3120 -0.02%
  • DOLLAR: 80.718 +0.11%

OVERSEAS MARKETS:

EUROPEAN MARKETS:

  • European markets fluctuated either side of unchanged in thin trading, struggling to find any direction with limited significant news flow and ahead of US GDP.
  • In the periphery, a Portuguese newspaper reported that China is ready to buy as much as €5B in Portuguese sovereign debt and Fitch late yesterday placed Greece's BBB- sovereign debt rating on watch negative.
  • Bank of England Minutes MPC voted 7-1-1 for unchanged policy in Dec, Posen voted for £50B more QE, Sentance voted for a 25 bps rise
  • UK Q3 final GDP +0.7% q/q vs consensus +0.8%, +2.7% y/y vs consensus +2.8%

ASIAN MARKTES:

  • Most Asian markets rose slightly today.
  • South Korea’s announcement of three days of naval firing exercises to begin today did not affect the region.
  • Oil refiners rose in Hong Kong after China raised wholesale gasoline and diesel prices 4%. Property shares rose, following yesterday’s 5% jump in China.
  • In trading that only reached 60% of the average, Australia was flat, with miners up on record copper prices, and profit-taking moving banks down.
  • Japan declined slightly on profit-taking following yesterday’s gain; sentiment was also dampened when November exports increased by less than expected.
  • China fell on a liquidity crunch after yesterday’s gain. Oil issues did not react to the country’s fuel-price rise, which had been expected and therefore priced in. Bank stocks fell on continued worries that more tightening measures may be in store.
  • Japan November trade surplus ¥162.8B vs consensus ¥452.8B. November supermarket comps (0.5%) y/y. 

Howard Penney

Managing Director

THE DAILY OUTLOOK - S P 1222