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Although the S&P 500 finished slightly higher (+0.07%), the upside momentum has waned to the point where there virtually is none.   Volume improved 8% day-over-day, but the breadth continues to deteriorate.  Looking at the sector studies four sectors actually declined yesterday while the remaining three outperformed. 

There were no dominant MACRO themes yesterday and there was a lackluster start to Q1 earnings season.  Today, we get a very important reading on inflation and shortly thereafter Fed Chairman Bernanke will testify before Congress on the outlook for the US economy.  With inflation expectations accelerating in March from February, will the FED Chairman lay the groundwork for slightly more hawkish guidance language at the next FOMC meeting?

Yesterday, the National Federation of Independent Business Optimism Index dropped to 86.8 in March from 88.0 in February, the lowest level since July 2009.  Also, after the close, the ABC confidence index fell to -47 in the week ending April 11, down 4 points from a week earlier. 

Despite lack luster confidence figures, Consumer Discretionary (XLY) outperformed the S&P 500.  Leading the XLY higher was Retail and Restaurants.  The Retail index finishing higher for a fourth straight session and both S&P indices were up +0.7% on the day.  Home-improvement stocks HD +2.6% and LOW +2.4% also provided some upside leadership to the XLY.

The Industrials (XLI) also outperformed, benefiting from both upbeat sell-side commentary and positive start to the earnings season. The rails were a bright spot with the S&P Railroads Index +1.1% ahead of earnings after the close from CSX +0.8%.

The Energy (XLE) and Materials (XLB) sectors were among the worst performing sectors yesterday. Energy commodities lower on the day and were significant laggards in the CRB; crude fell for a fifth straight day.  In the XLB, AA was a laggard among the industrial metals following its Q1 earnings, which missed top line expectations. 

The Dollar Index was down 0.07% yesterday and 1.26% over the past three days. 

In early trading, crude oil in New York ended a five-day decline as the dollar’s weakness countered concerns stockpiles in the U.S. will continue to increase. 

In early trading gold is trading higher, as the dollar is looking lower. 

Copper prices are trading higher and the dollar is weaker for the fourth straight day.   

In early trading, equity futures are trading above fair value after Intel's better than expected Q1 results and positive outlook for Q2.  As we look at today’s set up the range for the S&P 500 is 18 points or 0.9% (1,186) downside and 0.6% (1,204) upside. 

On the MACRO calendar today:

  • MBA Mortgage Applications,
  • April Bloomberg Global Confidence
  • March CPI
  • Retail Sales
  • Feb Business Inventories
  • Fed Beige Book

Howard Penney

Managing Director