Happy Birthday!

Daily State of the Markets 
Tuesday Morning – March 9, 2010  

One year ago today, it felt like that the world was coming to an end. One year ago today, the banking system was on the brink of collapse. One year ago today, we were worried about the safety of our money market funds and our bank saving accounts. One year ago today, the Dow dropped another 80 points, which capped off a terrifying, nineteen-day plunge of 1,723 points, or -20.8%. And one year ago today, the pain finally ended.

So, before we get too caught up in reviewing the events of Monday and the analysis of whether there is more upside to come, perhaps we should all gather together to collectively sing a joyous “Happy Birthday” to our heroes in horns. Everybody join in… and a one… and a two… and a three… “Haaaaapppy Birthday to you… Happy Birthday to you… Happy Birthday Mr. Thank-goodness-they-finally-changed-the-mark-to-market-rules-and-the-banks-started-making-money-from-0%-interest-rates… Happy Birthday to yooooouu!”

Come on, admit it; that WAS fun, right? But okay, if you’re not the singalong kinda guy/gal, perhaps you can smile at the fact that the Dow has advanced an impressive 4,005 points, or a nifty +61.2% over the past year while the S&P has gained +68.3%, and the NASDAQ has soared an eye-popping +83.8%. To which we’d like to say, Happy Birthday indeed.

Why are we spending so much time this morning looking back at what now feels like ancient history, you ask? In short, because the market spent Monday’s session in consolidation mode. Sure, the NASDAQ, Russell, and Midcap indices all finished with green screens and at new highs for the past year. But the rest of the market basically did a whole lot of nothin’.

However, a whole lot of nothin’ certainly beats the alternative after last week’s joyride to the upside. Therefore, we’ll have to take it as a positive that there was some spillover from Friday’s jobs reports, that concerns about Greece dwindled in response to reports that the EU was readying a rescue fund, and that there was some additional M&A activity/speculation on Monday.

While we certainly wouldn’t be surprised to see a pullback in the near-term to test the breakout of Dow 10,400ish, we were encouraged by Monday’s action. The lack of selling pressure would seem to suggest that any pullback from here should be viewed as a buying opportunity. That is, of course, unless the anticipated pullback is triggered by some sort of game-changing fundamental data.

Should the bears get their act together anytime soon, in addition to watching the key levels on the S&P, we would watch the action in the leaders; namely the NASDAQ, the Russell 2000, and the Midcaps. The bottom line is if any of these leading indices break back below their old highs, we would turn decidedly less optimistic. But as long as the leaders can remain above the high water marks, we would be inclined to buy the dips.

Turning to this morning, Fitch is out with comments suggesting that the UK still has some work to do on their fiscal situation. They also question the veracity of the global economic rebound. The comments are putting pressure on the futures in pre-market trading.

On the economic front, the NFIB Small Business Optimism index for February was reported at 88.0, which was below the consensus reading of 90.0 and January’s reading was 89.3.

Running through the rest of the pre-game indicators, the overseas markets are split by region with Asia fractionally higher and Europe pulling back on the Fitch comments. Crude futures are down $1.49 to $80.38. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.68%. Next, gold is moving down $10.20 to $1113.70 and the dollar is higher against the Euro, the Yen, and Pound. Finally, with about 60 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 30 points; the S&P’s are down about 5 points, while the NASDAQ looks to be just about 6 points below fair value at the moment.

Wall Street Research Summary

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