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TODAY’S S&P 500 SET-UP - March 7, 2011


Equity futures are holding slightly above fair value.  The price of oil is again likely to drive sentiment this week as Libya looks to be sliding into civil war and the regional civil unrest threatens to spill into Saudi Arabia. On Saturday, the Saudi authorities said they would ban all protests and marches after activists called for "a day of rage" this coming Friday.  As we look at today’s set up for the S&P 500, the range is 18 points or -0.47% downside to 1315 and 0.90% upside to 1333.

MACRO DATA POINTS:

  • 7 a.m.: ECB’s Trichet speaks in Basel after global economy meeting
  • 8 a.m.: Fed’s Lockhart speaks on U.S. economic outlook
  • 9:15 a.m.: Fed’s Fisher speaks in Washington
  • 11 a.m.: Export inspections (grains)
  • 11:30 a.m.: U.S. to sell $32b 3-mo., $30b 6-mo. bills
  • 3 p.m.: Consumer credit, est. $3.4b, prior $6.1b  

WHAT TO WATCH:

  • Clashes during past two days in Libya have become more deadly as rebels moved toward Tripoli and govt. troops escalated use of force in attempts to retake rebel-held cities.
  • In deals, LVMH plans to acquire Bulgari for ~EU3.7b; agrees to buy Bulgari family’s 50.4% stake and will make tender offer for the rest.
  • Galleon trial proceedings begin this week
  • Japan’s health ministry suspends use Pfizer’s Prevenar, Sanofi-Aventis’s ActHIB after reports of four deaths following vaccinations
  • Oil prices rise to new 29-month high as violence escalates in Libya. U.S. pump prices surged to $3.51 for two weeks ended March 4 on biggest rise since 2005, Lundberg survey said
  • Moody’s downgrades Greece three steps to B1 on rising risk of default

PERFORMANCE:


We have 5 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND. 

  • One day: Dow (0.72%), S&P (0.74%), Nasdaq (0.50%), Russell (0.47%)
  • Month-to-date: Dow (0.46%), S&P (0.46%), Nasdaq +0.09%, Russell +0.19%
  • Quarter/Year-to-date: Dow +5.12%, S&P +5.05%, Nasdaq +4.97%, Russell +5.28%
  • Sector Performance: - Healthcare (0.14%), Consumer Staples (0.44%), Utilities (0.61%), Energy (0.64%), Tech (0.81%), Consumer Discretionary (0.73%), Materials (0.91%), Industrials (1.16%), and Financials (1.23%)

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -918 (-2832)  
  • VOLUME: NYSE 1038.58 (-3.3%)
  • VIX:  19.06 +2.47% YTD PERFORMANCE: +7.38%
  • SPX PUT/CALL RATIO: 1.98 from 1.60 (+23.41%)

CREDIT/ECONOMIC MARKET LOOK:


Treasuries were stronger with the belly of the curve outperforming. 2s10s wider by nearly 2 bps

  • TED SPREAD: 20.10 +0.203 (1.020%)
  • 3-MONTH T-BILL YIELD: 0.12% -0.01%
  • 10-Year: 3.49 from 3.58
  • YIELD CURVE: 2.81 from 2.79

COMMODITY/GROWTH EXPECTATION:

  • CRB: 362.88 +0.64%; YTD: +9.04%  
  • Oil: 104.42 +2.46%; YTD: +12.39% (trading +2.05% in the AM)
  • COPPER: 448.55 -0.1-%; YTD: +1.04% (trading -0.02% in the AM)  
  • GOLD: 1,428.20 +0.83%; YTD: +0.67% (trading +0.76% in the AM)  

COMMODITY HEADLINES:

  • Wheat Planting Falls to Four-Year Low in Russia As Export Ban Hits Farmers
  • Global Corn, Wheat Harvests to Keep Trailing Demand on La Nina, DTN Says
  • Hedge Funds Cut Bullish Rice Bets by Most Since August on U.S. Supply Gain
  • Gold Approaches Record on Mideast Violence; Spot Silver Hits 31-Year Peak
  • Cotton Advances by Daily Limit to Record on Outlook for Demand From China
  • Corn Rises on Improved Global Grain Demand; Soybeans Climb for Fifth Day
  • Palm Oil Demand to `Outpace' Supplies in 2011, TransGraph Consulting Says
  • Coffee Rises on Concern About Curbed Supply From Vietnam; Cocoa Declines
  • Goldman Heads M&A Rankings Spurred by Commodities Demand in BRIC Economies
  • Middle East Unrest Means `Every Fund' Buying Oil Futures: Energy Markets
  • Rubber in Tokyo Declines as Oil Surges, Car Sales May Slow on Fuel Costs
  • China's Jinchuan Group Looking to Buy Stakes in Copper Deposits Overseas
  • Xstrata Hires Vodafone's Bond Before Glencore's Proposed Public Offering 

CURRENCIES:

  • EURO: 1.3987 +0.37% (trading +0.27% in the AM)
  • DOLLAR: 76.40 -0.11% (trading -0.25% in the AM) 

EUROPEAN MARKETS:

  • FTSE 100: +0.33%; DAX +0.09%; CAC 40 +0.08%; IBEX +0.48%
  • Markets have succeeded in shaking off early weakness and are currently trading in the black.
  • Most sectors are registering small gains with no real standout performances.
  • Moody's downgraded Greece's sovereign credit rating to B1. Moody’s said Greece faces considerable difficulties with revenue collection, and there is a risk that the nation may not meet criteria attached to continuing support from official sources after 2013.
  • EU leaders are scheduled to meet on Friday at an informal summit to discuss the sovereign crisis resolution ahead of the 24th/25th European Council meeting.
  • The WSJ reports that Portugal has €4B in cash according to an unnamed official at the Portuguese debt management agency.
  • In Ireland Fine Gael and the Labour Party have agreed to form a collation
  • Eurozone sentix index for Mar +17.1 vs cons 16

ASIAN MARKTES:

  • Nikkei (1.76%); Hang Seng (0.41%), Shanghai Composite +1.84%
  • Markets closed lower with the exception of China, on worries the situation in Libya could lead to oil supply issues.
  • Japan was hurt when Foreign Minister Seiji Maehara resigned, adding weight to the albatross hanging around the neck of the current government.
  • China rose after supportive economic policies were announced over the weekend.
  • Airline stocks fell 3% in Taiwan on the oil prices. Hit by the government’s new luxury tax, construction stocks lost 1-2%.
  • Australia fell as people shed miners and banks in an effort to avoid risk.
  • Japan Feb foreign exchange reserves (0.1%) m/m to $1.091T

Howard Penney

Managing Director

THE HEDGEYE DAILY OUTLOOK - setup