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TODAY’S S&P 500 SET-UP - October 6, 2010

As we look at today’s set up for the S&P 500, the range is 20 points or -1.44% downside to 1144 and 0.28% upside to 1164. Equity futures are trading above fair value in a continuation of yesterday's strong performance. Japan's decision to lower rates yesterday has sparked increased expectations that the Fed will implement further QE measures with other countries likely to follow suit in what could be a coordinated action to stimulate global growth.

Today's macro highlight is September's ADP's Employment report ahead of Friday's nonfarm payroll reading.

  • Costco (COST) reported 4Q EPS 97c vs est. 95c
  • Diamond Foods (DMND) forecast FY11 EPS $2.38-$2.48, vs est. $2.45
  • Equinix (EQIX) sees preliminary 3Q rev. $328m-$330m vs est. $336.6 (also watch SVVS, RAX)
  • M&T Bank (MTB); Allied Irish will start selling 22.4% stake
  • Yum! Brands (YUM) raised FY 2010 adj. EPS forecast to $2.48 from $2.43, vs est. $2.49

PERFORMANCE

  • One day: Dow +1.80%, S&P +2.09%, Nasdaq +2.36%, Russell 2000 +2.97%
  • Month/Quarter-to-date: Dow +1.45%, S&P +1.71%, Nasdaq +1.32%, Russell +1.95%
  • Year-to-date: Dow +4.95%, S&P +4.09%, Nasdaq +5.76%, Russell +10.22%

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 1092 (+3429)
  • VOLUME: NYSE - 1239.17 (+31.31%)  
  • SECTOR PERFORMANCE: Every sector was higher - The bulk of the yesterdays upside driven by the heightened momentum behind the risk trade following the unexpectedly aggressive easing announcement overnight by the BoJ. The BoJ cut target for the overnight rate to a range of 0.0%-0.1% from its previous target of 0.1% and announced a ¥5T facility to purchase JGBs, commercial paper, corporate bonds, exchange-traded funds and real-estate investment trusts. The accompanying bout of dollar weakness helped drive the outperformance on the part of commodities and commodity equities, while pockets of the market with outsized leverage to global recovery expectations also fared well.
  •  MARKET LEADING/LAGGING STOCKS YESTERDAY: Harley Davidson +9.18%, Juniper +5.98% and Pioneer Natural +5.75%/Iron Mtn -8.58, Colgate Palmolive -1.96% and American Express -1.95%
  • VIX: 21.76 -7.52% - YTD PERFORMANCE: (0.37%)
  • SPX PUT/CALL RATIO: 1.16 from 1.48, -21.88%

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 17.51 -0.741 (-4.061%)
  • 3-MONTH T-BILL YIELD: 0.12%, -0.01%
  • YIELD CURVE: unchanged at 2.09

COMMODITY/GROWTH EXPECTATION:

  • CRB: 288.42 +1.56%
  • Oil: 82.82 +1.66%
  • COPPER: 376.20 +0.83%
  • GOLD: 1,340.25 +1.94%%

CURRENCIES:

  • EURO: 1.3830 +1.02%
  • DOLLAR: 77.49 -0.89%%

OVERSEAS MARKETS:

Europe

  • European markets: FTSE 100: +0.92%; DAX +1.00%; CAC 40 +1.22%
  • Major indices remain strong with Mining, Construction, Financial Service sectors pacing other sectors.
  • Peripheral European markets up strongly with Greece's ASE Composite (+2.03%), Ireland's ISEQ (+1.25%) and Spain's IBEX (+0.66%)
  • Eurozone Q2 Final GDP +1.9% y/y vs prelim 1.9%
  • Germany Aug Industrial Orders +3.4% m/m vs cons +0.8%
  • Moody's places long-term ratings of Allied Irish Bank, Bank of Ireland plus ICS, EBS and IL&P on review for possible downgrade
  • Greece's 2009 budget deficit increases to 15.1% of GDP from 13.8% previously stated 

Asia

  • Asian markets: Nikkei +1.81%; Hang Seng +1.07%; Shanghai Composite (closed for public holiday)
  • Markets finished higher following yesterday performance on Wall Street. 
  • The Nikkei extended yesterday's gains building on the BOJ's unexpected rate cut and hopes of further quantitative easing from the Fed. Japanese Financials (+3.4%) led gains despite news that Japan's financial regulator is considering a capital surcharge for the country's largest banks.
  • Record high gold prices, driven by a faltering dollar, have driven gold mining shares higher. 
Howard Penney
Managing Director

THE DAILY OUTLOOK - levels and trends

THE DAILY OUTLOOK - S P

THE DAILY OUTLOOK - VIX

THE DAILY OUTLOOK - DOLLAR

THE DAILY OUTLOOK - OIL

THE DAILY OUTLOOK - GOLD

THE DAILY OUTLOOK - COPPER