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


Equity futures have traded mixed to fair value, indicating a preference for risk aversion, amid rising geopolitical tensions.  Violence in Iran yesterday, the world's fourth largest oil producer, helped push the Nymex oil contract back above $100/barrel. As we look at today’s set up for the S&P 500, the range is 18 points or -0.94% downside to 1294 and 0.43% upside to 1312.

MACRO DATA POINTS:

  • MBA Mortgage Index Drops 6.5%; Purchases, Refis Down; MBA mortgage applications index fell 6.5% week ended Feb. 25.; Purchases slid 6.1%, refis down 6.5%
  • 30-yr fixed rate 4.84% vs prior 5.00%
  • 7:30 a.m.: Challenger Job Cuts
  • 8 a.m.: Fed’s Hoenig speaks on Council on Foreign Relations
  • 8:15 a.m.: ADP Employment Change, est. 180k, prior 187k
  • 10 a.m.: Bernanke testifies before the House
  • 10:30 a.m.: DoE inventories
  • 2 p.m.: Fed Beige Book
  • 2:15 p.m.: Fed’s Lockhart speaks on economic outlook in Atlanta
  • 8 p.m.: Bernanke speaks on state, local challenges in New York, no Q&A

EARNINGS/WHAT TO WATCH:

  • Yahoo! is in talks to dispose of its 35% stake in its Japanese J-V with Softbank, according to two people briefed on the matter
  • Amazon.com threatens to sever ties with >10,000 affiliates in California amid a dispute with the state over proposed taxation of Internet purchases
  • The U.S. Senate will vote on a stopgap budget bill need to prevent a government shutdown; it passed the House yesterday 335-91 vote; Ontario public hearings to discuss TMX/ LSE deal begin today
  • FDA advisory panel members discuss draft report on menthol cigarettes
  • NFL collective bargaining agreement is scheduled to expire tomorrow

PERFORMANCE:


We have 4 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND.

  • One day: Dow (1.38%), S&P (1.57%), Nasdaq (1.99%), Russell 2000 (1.99%)
  • Month-to-date: Dow (1.38%), S&P (1.57%), Nasdaq (1.61%), Russell (1.99%)
  • Quarter/Year-to-date: Dow +4.15%, S&P +3.87%, Nasdaq +3.19%, Russell +2.99%
  • Sector Performance: - Materials (2.3%), Industrials (2.2%), Financials (2.2%), Consumer Disc (1.8%), Telecom (1.7%), Tech (1.7%), Energy (1.5%), Utilities (1%), Healthcare (0.7%), Consumer Spls (0.5%)

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -1590 (-2681)  
  • VOLUME: NYSE 1187.03 (-5.60%)
  • VIX:  21.01 +14.50% YTD PERFORMANCE: +18.37%
  • SPX PUT/CALL RATIO: 2.31 from 2.30 (+0.69%)

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 18.27 0.812 (4.649%)
  • 3-MONTH T-BILL YIELD: 0.13%
  • 10-Year: 3.41 from 3.42
  • YIELD CURVE: 2.75 from 2.70

COMMODITY/GROWTH EXPECTATION:

  • CRB: 355.18 +0.74%; YTD: +6.72%  
  • Oil: 99.63 +2.74%; YTD: +7.48% (trading +0.32% in the AM)
  • COPPER: 450.95 +0.29%; YTD: +0.86% (trading -0.49% in the AM)  
  • GOLD: 1,428.55 +1.18%; YTD: +1.02% ( trading +0.34% in the AM)  

COMMODITY HEADLINES:

  • JPMorgan Takes Delivery of Almost 1 Million Tons of Sugar, Most Since 2009
  • Cotton Jumps by Daily Limit, Rises for Fourth Day as Supply Remains Tight
  • Crude Oil Advances a Second Day in New York on Middle East Supply Concern
  • Farming in Australia Seen `Vulnerable' to Climate Change, Dryness in West
  • Palladium Seen Rising 15% in 2011 as Russian Cargoes Drop: Freight Markets
  • Gold Buying in China Jumps as Inflation Flares, Boosting Demand, UBS Says
  • Copper, Corn May Slump on Mideast Unrest as Gold Jumps to $1,500, UBS Says
  • China's Wheat-Growing Areas May Be Dry After Wetter-Than-Normal February
  • Pan Pacific May Deepen Copper Production Cut on Scarce Raw-Material Supply
  • Soybeans Advance as Rain, Flooding May Delay Brazil Harvest, Wheat Drops
  • Glencore Is Said to Brief 11 Banks as Commodities Trader Weighs Share Sale
  • Gold May Decline as Record Prices Prompt Sales, U.S. Job Prospects Improve
  • Milk Powder Climbs to Record on China Demand, Increasing Global Food Costs
  • Cocoa Arrivals From Brazil's Bahia Decline in Latest Week, Hartmann Says

CURRENCIES:

  • EURO: 1.3806 +0.10% (trading +0.20% in the AM)
  • DOLLAR: 77.049 +0.21% (trading -0.33% in the AM) 

EUROPEAN MARKETS:

  • FTSE 100: (0.43%); DAX: (0.66%); CAC 40: (0.82%) (as of 07:00AM ET)
  • European markets fell on increasing concerns over the political unrest in the Middle East and North Africa.
  • Bunds and Gilts were buoyed by safe-haven buying though investors remained cautious ahead of the ECB meeting on 3-Mar and the possibility of increased anti-inflation rhetoric.
  • Peripheral debt was pressured ahead of Portuguese T-bill auction and by S&P's warning they may still cut Greece and Portugal's debt rating further depending on the outcome of EU leaders talks over the crisis fund.

ASIAN MARKTES:

  • Nikkei (2.43%); Hang Seng (1.49%); Shanghai Composite (0.18%)
  • Though off their lows for the day, Asian markets closed lower following yesterday's declines in the US markets as higher oil prices and the turmoil in MENA returned to front-and-center.
  • China Railway Construction is among the biggest decliners, down 7.8% after saying it halted work on three projects with combined value of $4.24b in Libya.
  • The Nikkei suffered its worst percentage drop this year.
  • Airlines and automobile manufacturers led shares lower across the region, with All Nippon Airways down 3.05%, Cathay Pacific down 2.51%, Qantas down 2.15%, Toyota down 2.85%, and Honda down 2.49%.
  • Sands China closed down 6.2% after Las Vegas Sands (LVS) said it received a subpoena from the SEC regarding its Macau operations.
  • Yahoo Japan closed up almost 3.7% after Reuters reported Yahoo (YHOO) was in talks to sell its stake.
  • India said it would hold local elections in five states between 4-April and 10-April; the states send a cumulative 116 lawmakers to the lower house of Parliament.

Howard Penney

Managing Director

THE HEDGEYE DAILY OUTLOOK - setup