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Today’s S&P 500 set-up – February 22, 2011

Equity markets continued to slide yesterday as uncertainty surrounding events in Libya mounted.  The VIX gained 6.4% and was accompanied by a spike in oil prices.  Asia traded down overnight and Europe is currently trading slightly down across the board.  As we look at today’s set up for the S&P 500, the range is 24 points or -0.11% downside to 1306 and 1.73% upside to 1330.

MACRO DATA POINTS

  • 08:30 a.m.: Chicago Fed Nat Activity Index, January.  Est. 0.09, prior 0.03
  • 08:30 a.m.: Initial Jobless Claims, February 19th, Est. 405k, prior 410k
  • 08:30 a.m.: Continuing Claims, February 12th, Est. 3880k, prior 3911k
  • 08:30 a.m.: Durable Goods Orders, January, Est. 2.8%, prior -2.5%
  • 08:30 a.m.: Durables Ex Transportation, January, Est. 0.5%, prior 0.5%
  • 08:30 a.m.: Cap Goods Orders Nondef Ex Air, January, Est. -1.0%, prior 1.4%
  • 08:30 a.m.: Cap Goods Ship Nondef Ex Air, January, prior 1.7%
  • 10:00 a.m.: New Home Sales, January, Est. 305k, prior 329k
  • 10:00 a.m.: New Home Sales MoM, January, Est. -7.3%, prior 17.5%
  • 04:30 p.m.: Fed Balance Sheet

WHAT TO WATCH

  • GM missed estimates this morning, announcing a profit of $0.31 per share versus consensus EPS of $0.44.
  • Oil is approaching $120 in London on concern Libya’s uprising is reducing shipments from Africa’s third-largest producer
  • Angela Merkel is planning to accelerate cuts in borrowing next year as it complies with a legal requirement to shrink debt.  The EU summit on March 24-25 will be interesting to watch as the debate over interest rates on aid and the plan to control Europe’s debt crisis heats up.
  • U.S. railroads’ fuel-efficiency advantage over trucking companies may expand as they boost investments in technology while trucking companies are forced to invest more in personnel.
  • The Bloomberg “Chart of the Day” shows the combined 12-month earnings forecast for companies in the MSCI Emerging Markets Index and outlines the need for earnings revisions as interest rates rise.  Interest rate risk for emerging market economies has been highlighted repeatedly by the Hedgeye Macro Team over the past several months.
  • TGT reported earnings this morning of $1.45 per share versus consensus of $1.40.  However, included in the $1.45 was a $0.07 tax benefit.

PERFORMANCE:

We have 3 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND.

  • One day: Dow -0.88%, S&P -0.61%, Nasdaq -1.21%, Russell 2000 -1.64%
  • Month-to-date: Dow +1.80%, S&P +1.65%, Nasdaq +0.85%, Russell +2.36%
  • Quarter/Year-to-date: Dow +4.56%, S&P +3.96%, Nasdaq +2.64%, Russell +2.04%
  • Sector Performance: - Materials -0.74%, Energy +2.03%, Consumer Spls -0.24%, Healthcare -0.96%, Utilities -0.22%, Industrials -1.75%, Tech -1.18%, Consumer Disc -1.46%, Financials -0.44%

EQUITY SENTIMENT

  • ADVANCE/DECLINE LINE: -909 (-2378)
  • VOLUME: 1330.38 (+1.0%)
  • VIX: 22.13 (+6.4%)
  • SPX PUT/CALL RATIO: 1.34 from 2.40 (-4.4%)

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 19.08 from 18.98
  • 3-MONTH T-BILL YIELD: 0.11% from 0.13%
  • 10-YEAR: 3.43% from 3.49%

COMMODITY/GROWTH EXPECTATIONS:

  • CRB: 348.5 +1.13%; YTD: +4.56%
  • Oil: 100.60 +2.55%; YTD: +9.09%
  • Copper: 431.55 0.56%; YTD: -2.79%
  • Gold: 1416 0.31%; YTD: +0.31%

COMMODITY HEADLINES:

  • Oil Surges to $119 on Libya Crisis; Goldman Sees ‘Upside Risk’
  • Platinum to Stabilize at ‘Comfortable’ $1,800, Anglo Says
  • Food-Price Threat Worsened by Government Mistrust of Business, Olam Says
  • Wheat Resumes Plunge as African Unrest Drives Away Speculators
  • Gold Fluctuates Near Seven-Week High on Libya, Inflation Concern
  • Food Inflation Quickens, Adding Pressure on Government Before India Budget
  • Surging Prices From Singapore to Vietnam Herald Higher Rates, Currencies
  • Oil Rises on Libya Disruption; Goldman Sachs Sees ‘Upside Risk’
  • Palm Oil Output in Malaysia to Gain in 2011, Yusof Predicts
  • Wheat, Corn Advance as Demand for U.S. Supplies May Increase

CURRENCIES

  • EURO: 1.3764 -0.16%
  • DOLLAR: 77.131 -0.36%

EUROPEAN MARKETS

  • FTSE 100: (0.36%); DAX: (1.20%); CAC 40: (0.22%)
  • Zapatero Extends Lead Over Socrates in Debt Race: Euro Credit
  • Europe Economic Confidence Reaches Highest Since Late 2007 on German Boom
  • Allianz Raises Dividend After Fourth-Quarter Profit Gains, Target Exceeded
  • Swiss Franc, Yen Climb as Deepening Libya Violence Spurs Demand for Safety
  • Barclays, After Victory, May Face Writedown of Lehman Assets

ASIAN MARKETS

  • Nikkei (1.19%); Hang Seng (1.34%); Shanghai Composite +0.56%
  • Deutsche Bank Gets Six-Month Trading Ban in South Korea
  • Surging Prices From Singapore to Vietnam Herald Higher Rates, Currencies
  • Lu Pledges to Clean Up Alibaba After Scandal Led to Ouster of Predecessor
  • India's Sensex Falls Most Since November 2009 on Inflation, Oil Concerns

THE HEDGEYE DAILY OUTLOOK - levels and trends 224

Howard Penney

Managing Director