TODAY’S SET UP
As we look at today’s set up for the S&P 500, the range is 44 points or 2.3% (1,059) downside and 1.8% (1,103) upside. Equity futures are trading above fair value, as technology stocks in Europe are among the leading performers, buoyed by strong results from Apple (AAPL).
The Recovery/Reflation trade drove the market higher yesterday as Materials (XLB), Energy (XLE) and Industrials (XLI) were the three best performing sectors yesterday. The RECOVERY trade benefited from a three-week high in China shares on speculation surrounding a relaxation of tightening measures aimed at the residential property market. In addition, Spain, Ireland and Greece held relatively successful bond auctions yesterday.
China closed up another 0.26% this morning. Also helping to confirm the move in the RECOVERY trade yesterday, copper rose 1.6% - the most in three weeks.
Following yesterday’s move in the S&P 500, the Materials (XLB) and Energy (XLE) are now positive on TRADE, bringing the total to five of nine - the other three Utilities (XLU), Consumer Staples (XLP), and Technology (XLK). Utilities (XLU) remains the only sector positive on TREND.
The only sector to decline yesterday was Healthcare (XLV). The weakness largely attributed to JNJ which declined 1.7%. JNJ missed on the top-line for Q2 and lowered its 2010 EPS guidance by a larger-than-expected $0.15 to reflect the impact of the OTC recall and manufacturing suspension and FX headwinds.
Fed Chairman Ben S. Bernanke will give his semiannual report on monetary policy to the Senate
Banking Committee today and will testify at the House Financial Services Committee tomorrow.
Treasuries were unchanged to a tad firmer yesterday despite the recovery in stocks. The dollar index traded up 0.1% and the VIX declined 7.9%.
The Investors Intelligence poll sees bullish sentiment increases to 35.6% from 32.6% in the latest Investor's Intelligence poll.
THE EARNINGS SEASON
Yesterday of the 26 companies that reported 2Q earnings 81% beat the earnings estimates, while 35% of the companies missed revenue expectations. Those same percentages hold for what we have seen so far in the 2Q earnings season.
THE HEDGEYE MACRO TRADE RANGES FOR 7/21/10: