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TODAY’S S&P 500 SET-UP – February 2, 2011

Equity futures are struggling to find clear direction in the wake of yesterday's surge which saw the Dow close back above the 12K level for the first time since Jun-08.  As we look at today’s set up for the S&P 500, the range is 18 points or -1.35% downside to 1290 and +0.03% upside to 1308.

MACRO DATA POINTS:

  • MBA mortgage applications index rose 11.3% week ended Jan. 28. Purchases rose 9.5%, first increase since week ended Dec. 24.  Refis jumped 11.7% Avg. 30-yr fixed rose to 4.81% from 4.80% prior week; rate hit 4.21% in Oct., lowest since group’s records began in 1990
  • Refis as % of total no. of loans fell to 69.3% from 70.3%
  • Prior week’s 12.9% drop, to lowest since Nov. 2008, wasn’t adjusted for shortened MLK Day
  • 7:30 a.m.: Challenger Job Cuts 
  • 8:15 a.m.: ADP employment change, est. 140k
  • 10:30 a.m.: DOE inventories of crude (est. 2500k), distillate (est. -1000k) and gasoline (2000k) 
  • 11: a.m.: Fed to purchase $1.5b-$2.5b bonds
  • 5:30 p.m.: Fed’s Duke speaks in N.C.  

TODAY’S WHAT TO WATCH:

  • Egyptian President Hosni Mubarak’s pledge to step down later this year failed to appease opposition groups demanding an end to his 30-year rule. The unrest that started in the region one month ago spread to Yemen, with President Ali Abdullah Saleh saying today he won’t seek to extend his term when it expires in 2013.
  • One Equity Partners considering options for its Duropack corrugated board unit, including a sale, according to two people with knowledge of the matter.
  • Senate to take a procedural vote as early as today on republicans’ bid to repeal the U.S. health-care overhaul

PERFORMANCE:

Both consumer ETF’s, XLP & XLY remain BEARISH TRADE - 7 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND. 

  • One day: Dow +1.25%, S&P +1.67%, Nasdaq +1.89%, Russell 2000 +2.26%
  • Month-to-date: Dow +1.25%, S&P +1.67%, Nasdaq +1.89%, Russell +2.26%;
  • Quarter/Year-to-date: Dow +4.00%, S&P +3.97%, Nasdaq +3.71%, Russell +1.94%
  • Sector Performance - (All 9 sectors rose): - Materials +2.86%, Financials +2.07%, Energy +1.9%, Healthcare +1.8%, Tech +1.80%, Industrials +1.69%, Consumer Disc +1.18%, Utilities +1.01%, Consumer Spls +0.7%

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 1962 (+807)  
  • VOLUME: NYSE 1094.59 (-8.69%)
  • VIX:  17.63 -9.73% YTD PERFORMANCE: -0.68%
  • SPX PUT/CALL RATIO: 1.21 from 3.06 (-60.53%)

CREDIT/ECONOMIC MARKET LOOK:

Treasuries ended a two-day decline on concern over U.S. unemployment and speculation that data will show the recovery isn’t strong enough to bolster the labor market.

  • TED SPREAD: 15.33 -0.609 (-3.823%)
  • 3-MONTH T-BILL YIELD: 0.15%      
  • YIELD CURVE: 2.87 from 2.84

COMMODITY/GROWTH EXPECTATION:

  • CRB: 342.17 +0.22%  
  • Oil: 90.77 -1.54% - trading +0.34% in the AM
  • COPPER: 454.70 +1.98% - trading -0.11% in the AM
  • GOLD: 1,342.03 +0.37% - trading -0.44% in the AM

OTHER COMMODITY NEWS:

  • Crude oil in New York dropped from a two-year high as concern eased that supplies through the Suez Canal may be disrupted by unrest in Egypt. Brent crude traded at more than $100 a barrel for a second day.
  • Natural gas futures declined for the first time in three days as forecasts showed milder weather later this month, reducing demand for the heating fuel. 
  • Spot gold climbed, rebounding from the biggest monthly drop since 2009, on speculation that rising food and oil prices will increase the metal’s appeal as a hedge against inflation. Protests in Egypt also boosted haven demand.
  • Copper rose to a record on signs demand will remain robust in China, the world’s biggest consumer of the metal used in cars, homes and appliances
  • Soybeans rose to a 30-month high and corn climbed as a strike by Argentina’s port workers halted grain vessels, increasing demand for supplies from the U.S., the world’s biggest exporter. 
  • Brazilian exports of crude, iron ore and coffee fell in January from December as the country posted a lower-than-expected trade surplus in the month, the trade ministry said Tuesday.

CURRENCIES:

  • EURO: 1.3823 +0.91% - trading +0.01% in the AM
  • DOLLAR: 77.067 -0.86% - trading -0.10% in the AM

EUROPEAN MARKETS:

  • FTSE 100: +0.85%; DAX +0.09%; CAC 40 +0.21%; IBEX +0.16%
  • Europe is mostly higher for a second day led by commodities and cars.
  • FTSE100 traded above 6,000 led by commodity and bank shares.
  • Egypt remains a focus after President Mubarak said he will leave office in September.
  • Advancing sectors lead decliners 10-8 with technology +1.1% and banks +0.7% heading gainers, whilst basic resources and industrial (0.8%) lead fallers.
  • UK Jan Construction PMI 53.7 vs con 49.9, prior 49.1

ASIAN MARKETS:

  • Nikkei +1.8%; Hang Seng +1.8%; Shanghai Composite (closed)
  • Asian stocks advanced the most in two months as companies reported higher earnings amid faster economic growth.
  • Commodity stocks gained the most, with Hitachi Metals’s 5.8% increase leading the sector. Mitsubishi Materials advanced 5.6%, and Ube Industries gained 4.5%. BHP Billiton gained 2.4% and Rio Tinto gained 2.6% as metals prices climbed.
  • Toyota gained 3.3% after saying U.S. sales rebounded, Paladin Energy rose 5.8% after completing an acquisition.
  • Panasonic reported 3Q net +24% y/y on strong Japan home appliance sales, full year guidance is unchanged.
  • Hong Kong finished a shortened trading day higher, and will now be closed until 7-Feb.
  • Japan went up as investors bought large-cap stocks on positive sentiment stemming from Wall Street. 
  • Australia rose, but insurers fell as Cyclone Yasi approached the country.
  • South Korea is closed until 7-Feb, Taiwan is closed until 8-Feb, and China is closed until 9-Feb for the Lunar New Year.

THE HEDGEYE DAILY OUTLOOK - 2 2 2011 7 20 00 AM