Help IS on the Way

Daily State of the Markets 
Thursday Morning – April 29, 2010  

After the biggest shellacking in nearly three months, stocks were able to bounce back a bit on Wednesday. While the bears can be heard mumbling something about the 53 point pop being “just a bounce,” the more upbeat crowd on the other side of the suggests the fact that stocks did not follow through to the downside yesterday as being a positive.

It was a see-saw session where stocks reacted to each and every headline. Stocks rallied on the usual batch of better-than-expected earnings and were heartened by word that short selling had been banned in Greece until the end of June. And the report out of Germany that the Germans would indeed live up to their end of the bargain in the Greek bailout package pushed stocks to the highs of the day. But then, just moments later, the S&P downgrade of Spain’s debt hit the wires, which, as you can probably imagine, wasn’t viewed as a good thing.

For about an hour, worries of contagion and debt default dominated the market as it looked like the bears might just have something with this story. There was talk of who was next and that the U.S. would eventually succumb to the same illness. However, various headlines out of the EU and the IMF served to reassure investors that help IS on the way for the Greeks (and likely the rest of the PIGI’S).

While it didn’t cause much of a stir, the Fed’s decision to leave rates and the vast majority of their accompanying statement alone also served as a calming factor. No one expected the FOMC to move on rates, or even mention when they might do so. However, there was some concern that Mr. Bernanke might decide to kill the “exceptionally low” and “extended period” language in their discussion regarding the outlook for interest rates. In addition, if you looked hard enough at the statement, it became apparent that the FOMC did upgrade their view of both the overall economy and the jobs picture – albeit modestly.

So, with the risk of a Greek default appearing to wane (at least for a day or so) and the Fed providing assurance that they are going to stay the course until the economy truly recovers, the reasons to sell became less urgent. As such, the dip buyers returned and we were treated to green screens into the closing bell.

To be sure, one up-day does not a downtrend reverse. But then again, since the decline was only two days in duration, it is hard to tell which team really has the ball at the moment. Thus, we will advise an open mind and some flexibility going into today’s session.

Turning to this morning… The Labor Department reported that initial claims for unemployment insurance for the week ending April 24th fell by 11,000 to 448K, which was above the expectations for a reading of 445K. Continuing Claims for unemployment for the week ending April 17th were above consensus at 4.645M vs. expectations for 4.618M. For comparison purposes, last week’s revised total was 4.663M (from 4.646M).

Running through the rest of the pre-game indicators, w the major overseas markets are split by region with Asia lower and Europe higher. Crude futures are up $1.04 to $84.26. On the interest rate front, the yield on the 10-yr is currently trading at 3.77%. Next, gold is off $4.30 to $1167.50 and the dollar is higher against the Yen but weaker agains the Euro and Pound. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a nice open. The Dow futures are currently ahead by about 54 points; the S&P’s are up by about 9 points, while the NASDAQ looks to be about 12 points above fair value at the moment.

Finally, try doing something nice for someone today (for no reason at all)…

* Report includes items that make comparisons to the consensus estimate questionable

Wall Street Research Summary

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