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TODAY’S S&P 500 SET-UP - February 15, 2011


Equity futures are trading narrowly below fair value following another inconclusive performance on Monday as markets struggle for direction. As we look at today’s set up for the S&P 500, the range is 14 points or -1.07% downside to 1318 and zero upside to 1332.

 MACRO DATA POINTS:

  • 8:30 a.m.: Empire manufacturing survey, Feb., est. 15, prior 11.92
  • 8:30 a.m.: Import price index, Jan., est. 0.8% M/m, prior 1.1%
  • 8:30 a.m.: Advance retail sales, Jan., est. 0.5%, prior 0.6%; ex. autos & gas est. 0.4%, prior 0.4%
  • 9 a.m.: Total net TIC flows, Dec., est. $43.7b, prior $39.0b; long-term TIC flows
  • 10 a.m.: Fed’s Sandra Pianalto speaks on economy in Akron, Ohio
  • 10 a.m.: Fed’s Daniel Tarullo testifies on derivatives regulation
  • 10 a.m.: Business inventories, Dec., est. 0.7%, prior 0.2%
  • 10 a.m.: NAHB housing market index, Feb., est. 16, prior 16
  • 11:30 a.m.: U.S. sells 4-week bills
  • 4:30 p.m.: API inventories, Feb. 11
  • 5 p.m.: ABC consumer confidence, Feb. 13

EARNINGS/WHAT TO WATCH:

  • Boards of Deutsche Boerse and NYSE Euronext plan to vote this morning on whether to combine the cos., according to a person with direct knowledge of the matter
  • ASX and Singapore Exchange agreed to change composition of board of proposed merged co. in order to win regulatory approval; would include five Australian and five Singaporean citizens among its 13 members
  • Zynga is in talks to raise funding from T. Rowe Price Group and Fidelity Investments at a valuation of close to $10b, two people familiar with the matter say
  • GE and a JV partner are seeking to sell GE SeaCo container leasing unit for ~$2.5b, FT reports, citing people familiar with matter
  • Watch Marriott after it said post-close it plans to spin off timeshare business in tax-free dividend in late 2011. Co. also reported 4Q adj. EPS 39c vs est. 36c
  • GM CEO Dan Akerson says co. will boost investments in China and roll out > 20 new and upgraded models in the country by 2012
  • Credit-card monthly charge-offs reported

PERFORMANCE:


The XLU broke TRADE - 8 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND.

  • One day: Dow (0.04%), S&P +0.24%, Nasdaq +0.28%, Russell +0.46%
  • Month-to-date: Dow +3.16%, S&P +3.59%, Nasdaq +4.34%, Russell +5.72%
  • Quarter-to-date: Dow +5.97%, S&P +5.94%, Nasdaq +6.19%, Russell +5.39%
  • Sector Performance: - Energy +2.20%, Materials +1.08%, Healthcare +0.34%, Tech +0.14%, Financials +0.05%, Industrials (0.11%), Consumer Discretionary (0.40%), Consumer Staples (0.44%), and Utilities (0.72%)

  EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 321 (-1132)  
  • VOLUME: NYSE 817.23 (-15.92%)
  • VIX:  15.95 +1.66% YTD PERFORMANCE: -10.14%
  • SPX PUT/CALL RATIO: 2.09 from 1.84 (+13.68%)

CREDIT/ECONOMIC MARKET LOOK:


Two-yr treasury yield is near highest in > 8 months before U.S. retail sales data expected to show recovery is gathering pace.

  • TED SPREAD: 19.03 -1.420 (-6.947%)
  • 3-MONTH T-BILL YIELD: 0.13% +0.01%
  • 10-Year: 3.62 from 3.64
  • YIELD CURVE: 2.75 from 2.79

COMMODITY/GROWTH EXPECTATION:

  • CRB: 338.67 +0.26%; YTD: +1.78%  
  • Oil: 84.81 -0.90%; YTD: -7.47% (trading +0.58% in the AM)
  • COPPER: 463.75 +1.99%; YTD: +4.02% (trading -0.46% in the AM)  
  • GOLD: 1,364.85 +0.56%; YTD: -3.20% ( trading +0.61% in the AM)  

COMMODITY HEADLINES:

  • President Barack Obama proposed user fees as an option to help the Commodity Futures Trading Commission carry out derivatives oversight as part of a $308 million budget request for the agency. 
  • Brent has outpaced New York futures, widening the difference between the prices for April delivery to more than $14 a barrel, as unplanned outages cut European supplies.  Gasoline for March delivery gained 5.22 cents, or 2.1 percent, to settle at $2.5174 a gallon, and heating oil for March climbed 5.46 cents, or 2 percent, to $2.7504 a gallon. 
  • Copper rose to a record in London after imports increased in China, the world’s largest metal consumer.  Data from China’s customs agency showed that imports in January surged 25 percent from a year earlier and 5.7 percent from December. Copper prices are up 61 percent since July 1. 
  • Corn and soybean futures fell on Monday as the U.S. government's first forecast of crops in the United States this year exceeded expectations, leading traders to reduce exposure in the markets. 
  • Wheat prices extended a rally to the highest since 2008 on signs that political tension in the Middle East and North Africa is spurring governments to boost grain imports, while drought threatens the crop in China.
  • Coffee prices rose today, extending a rally to the highest since 1997, as inventories tallied by an industry group remain close to a 40-year low. 
  • Rubber advanced to a record amid speculation that China, the largest consumer, may step up buying to rebuild stockpiles before the low-production period begins in major growing areas in Thailand.

CURRENCIES:

  • EURO: 1.3497 -0.42% (trading +0.21% in the AM)
  • DOLLAR: 78.614 +0.20% (trading -0.26% in the AM) 

EUROPEAN MARKETS:

  • FTSE 100: (0.01%); DAX: +0.19%; CAC 40: +0.40% (as of 06:45 EST)
  • European markets have traded in a relatively narrow range either side of unchanged as investors digest the latest heavyweight corporate earnings, inflation data from UK and China and Q4 preliminary growth data from across Europe.
  • Peripheral markets are amongst the region's largest gainers. EcoFin's Juncker announced late yesterday that Eurozone's finance ministers have agreed to increase the lending capabilities of the EFSM to €500B starting in 2013.
  • Silvio Berlusconi’s Mediaset slides 1.6% as Milan judge says Italian PM must stand trial on charges of prostitution involving a minor and abuse of power.
  • The Spanish T-Bill auction was well received.
  • Swedish Central Bank raised its benchmark interest rate 25bps to 1.50% and also its projection for interest rates going forward.
  • German investor confidence rose to 15.7 in Feb. from 15.4 in Jan., missing est. of 20.
  • Q4 preliminary GDP - France +0.3% q/q vs con +0.6% Germany +4.0% y/y vs con +4.1%
  • UK Jan; RPI +5.1% y/y vs con +5.0%; CPI +4.0% y/y vs con +4.0%

ASIAN MARKTES:

  • Nikkei +0.20%; Hang Seng (0.96%); Shanghai Composite +0.0%
  • Asian markets were mixed in a tight range today, despite being helped by the fact that inflation in China came in lower than expected. China January CPI +4.9% y/y vs consensus +5.4%.  According to the NYT the Chinese changes the way the CPI is calculated this month…..  “The rise in prices was less than expected, but some economists said the data was difficult to judge because the statistics bureau recalculated the index to give less weight to food costs and more weight to housing costs. Those shifts and other changes designed to catch up with consumption patterns made it impossible to directly compare the January data to earlier months.”
  • Chinese banks fall on renewed concern country will raise rates
  • Hopes for profits were nearly outweighed by profit-taking as Japan rose slightly.
  • Thailand up +0.15, Bualang Securities jumped 9% on announcing it will pay both stock and cash dividends.
  • Australia finished flat. Brambles fell 1% and Westpac Bank edged down on results, taking other banks with it in sympathy.
  • South Korea fell (0.20%) slightly on foreign selling.
  • Indonesia was closed for The Prophet’s Birthday.
  • Japan December revised industrial output +3.3% m/m vs initial +3.1%. December capacity utilization index +3.0% m/m.
  • Japanese exporters climb as BoJ raises its economic assessment for first time in nine months.

Howard Penney

Managing Director

THE HEDGEYE DAILY OUTLOOK - setup