Just Another Manic Monday?

Daily State of the Markets 
Monday Morning – February 2, 2010  

Good morning. If Monday’s are starting to give you a feeling of déjà vu all over again, don’t be alarmed. In doing a little digging, we found that yesterday’s gain marked the eighth straight Monday in which the S&P has managed to find its way into the plus column. And if you look back a little farther, you’ll find that this trend appears to be a descendant of the Energizer Bunny. In short, stocks have not only finished higher for the last 8 Monday’s in a row, but the S&P has also finished in the green on 13 of the last 14 Mondays as well as16 of the last 18. (Okay, to be fair, we used one Tuesday due to a Monday holiday.)

While this does fit into the category of “fun facts to know and tell” and most people may be surprised to learn that Monday’s have been up days for two months straight, after Monday, it’s been downhill from there lately. Yep, despite the nice pop higher to start the week, stocks have finished the week lower for the last three straight weeks and in five of the last seven. So, will yesterday’s triple-digit sigh of relief we spoke of in Monday’s pre-market missive break the trend or turn out to be just another manic Monday?

Yesterday’s version of the Bangles’ second biggest hit was sponsored by a couple of reports that got very little attention and a couple more that did get some press coverage.

By now, I’m guessing you’ve heard that Personal incomes were up in December and that the ISM Manufacturing Index came in well above expectations. The latter was definitely good news as the report showed that manufacturing activity accelerated in January, hitting its highest level since August 2004. Plus, the reading of 58.4 marked the sixth straight month in which the index has managed to stay above the 50-mark, which is indicative of expansion in the nation’s manufacturing sector.

However, one of the driving forces behind the early strength in the market indices was the fact that nothing bad came out about Greece’s sovereign debt problems over the weekend. It was actually just the opposite as the EU said that the Greek deficit reduction play was “ambitious but achievable” and that the union would give Greece until the end of 2012 to bring its deficit down below 3% of GDP. In short, this eased concerns about imminent problems from one of the little PIGI’S.

However, the big story that nearly no one talked about came from the Financial Times. A Deal report stated that the “Volcker Rule” may be dropped. To review, the “Volcker Rule” would give bank regulators the power to put limits on bank size, the ability of commercial banks to participate in proprietary trading of financial securities, as well as investments by banks in hedge funds, real estate and private equity. And to many, the idea of the administration backing off its persistent attack of the nation’s biggest banks was a breath of fresh air.

So, with an oversold market and the correct day on the calendar, the bulls were able to once again get something going yesterday. But the big question is if our heroes in horns will be able to keep up the happy talk now that Manic Monday has passed.

Turning to this morning, we don’t have any economic data to review before the bell. The key event of the day will be Former Fed Chairman Paul Volcker’s testimony on his plans to put limits on the nation’s big banks. The so-called “Volcker Rule” is the center of attention in the markets these days, so this is definitely something to watch.

Running through the rest of the pre-game indicators, the overseas markets are mostly higher. Crude futures are up $0.75 to $75.18. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.64%. Next, gold is moving up by $7.50 and the dollar is lower against the Yen and Pound but lower against the Euro. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a modestly higher open. The Dow futures are currently ahead by about 15 points; the S&P’s are up about 3 points, while the NASDAQ looks to be about even with fair value at the moment.

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

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