Hedgeye - THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - February 14, 2011

Equity futures are trading slightly below fair value ahead of this week's key data releases which are likely to set the tone for further short-term risk appetite. As we look at today’s set up for the S&P 500, the range is 16 points or -0.99% downside to 1316 and +0.21% upside to 1332.

MACRO DATA POINTS:

8:30 a.m.: NOPA monthly oil, soybean capacity, Jan.
10 a.m.: New York Fed briefing on regional economy. President William Dudley speaks
11 a.m.: Weekly export inspections (corn, soybeans, wheat)
11:30 a.m.: U.S. to sell $32b 3-mo. bills, $30b 6-mo. bills

EARNINGS/WHAT TO WATCH:

Biogen Idex (BIIB): May buy back 20m shrs
Devon Energy (DVN): May rise to $100-shr: Barron’s
KLA-Tencor (KLAC): Plans to buy back 10m shrs
Intercontinental Hotels (IHG): may rise on economic recovery: Barron’s; may boost div. ~10%: Sunday Times
International Paper (IP): May raise div., buy back shares: Barron’s
Silicon Graphics International (SGI): May be profitable for the full year: Barron’s
Tootsie Roll Industries (TR): 4Q EPS in line with est., sales beat (1 est.)
Transocean (RIG): Richard George is resigning from board, and Chairman Robert E. Rose and director Victor E. Grijalva won’t stand for re-election; seeking board approval for a $1b div.

PERFORMANCE:

Strength was seen from Financials and Discretionary; weakness in Energy and Tech. We have day 5 of perfect = 9 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND.

One day: Dow +0.36%, S&P +0.55%, Nasdaq +0.68%, Russell +1.16%
Month-to-date: Dow +3.21%, S&P +3.35%, Nasdaq +4.05%, Russell +5.23%
Quarter/Year-to-date: Dow +6.01%, S&P +5.69%, Nasdaq +5.9%, Russell +4.91%
Sector Performance: - Financials +1.37%, Consumer Discretionary +1.02%, Industrials +0.75%, Consumer Staples +0.54%, Materials +0.56%, Tech +0.53%, Healthcare +0.22%, Energy (0.01%), and Utilities (0.19%)

EQUITY SENTIMENT:

ADVANCE/DECLINE LINE: 1453 (+1360)
VOLUME: NYSE 972.00 (-5.34%)
VIX: 15.69 -2.49% YTD PERFORMANCE: -11.61%
SPX PUT/CALL RATIO: 1.84 from 1.66 (+11.17%)

CREDIT/ECONOMIC MARKET LOOK:

Treasuries were stronger on the session, but not without a pullback following the Egypt news flow. The 10yr yield fell to 3.61% in early trading, before pulling back to 3.64%.

TED SPREAD: 20.04 -0.101 (-0.503%)
3-MONTH T-BILL YIELD: 0.12%
10-Year: 3.64 from 3.70
YIELD CURVE: 2.79 from 2.85

COMMODITY/GROWTH EXPECTATION:

CRB: 337.78 -0.64%; YTD: +1.50%
Oil: 85.58 -1.33%; YTD: -7.15% (trading +0.06% in the AM)
COPPER: 453.60 -0.17%; YTD: +3.41% (trading +1.49% in the AM)
GOLD: 1,357.30 -0.35%; YTD: -4.26% ( trading +0.09% in the AM)

COMMODITY HEADLINES:

Oil fell to a 10-week low in New York after Egyptian President Hosni Mubarak stepped down and handed power to the military, reducing concern that crude shipments from the Middle East will be disrupted.
Gold erased some of early gains in directionless trade on Friday, under pressure from a
drop in ETF holdings to their lowest since late January, a firm U.S. dollar and a lacklustre physical market.
The tightest physical silver supplies in four years have tipped the U.S. silver futures market into backwardation this week, making near-term prices more expensive than more distant months.
Corn traded near a 30-month high in Chicago, heading for a second weekly advance, on increased demand amid tight supply. Wheat and soybeans climbed.

CURRENCIES:

EURO: 1.36554 -0.53% (trading -0.63% in the AM)
DOLLAR: 78.46 +0.27% (trading +0.29% in the AM)

EUROPEAN MARKETS:

FTSE 100: (-0.20%); DAX: +0.23%; CAC 40: (-0.18%) (as of 07:00 AM EST)
European markets mostly trade higher following firmer markets across Asia, with European M&A activity and generally constructive corporate results also helping sentiment.
Credit Suisse rallied after raising capital from Middle Eastern investors.
The pound and the euro are trading at $1.6017 and $1.3460 respectively
euro was pressured by reports that WestLB failed to agree on a restructuring over the weekend and BaFin becoming increasingly involved in how the bank will be rescued

ASIAN MARKTES:

Nikkei +1.13%; Hang Seng +1.28%; Shanghai Composite +2.54%
Asian markets rose this morning on optimism that an Egyptian crisis has been largely averted, getting a boost when Japan’s GDP shrinkage was less than expected.
Japan rose on the economic data and a weaker yen.
South Korea +1.89, Samsung Engineering rallied on announcing a $600M contract with Saudi Arabian Oil Co.
Widespread gains by banks and miners powered Australia higher +1.12. BHP Billiton gained 2% after China January copper imports beat expectations.
Taiwan up 0.88% - Asustek jumped 7% on results.
Japan Oct-Dec GDP real GDP (1.1%) y/y. China January trade surplus $6.45B vs consensus $10.7B.

Howard Penney

Managing Director