Spin Cycle: On

Daily State of the Markets 
Friday Morning – March 5, 2010  

Although not all of yesterday’s news qualified for the positive side of the ledger, it was clear by the end of the day that all news was considered good news on a quiet Thursday in front of a big jobs report. Thanks mostly to a buy program or three in the last 45 minutes, the Dow finished with enough green on the screen to put the venerable index back in the black for the year.

To be fair, there was some good news to be found in yesterday’s tape. Probably the biggest positive was the fact that one of the PIGI’S went to market and this time, they weren’t turned away. If you will recall, it was Greece’s “failed auction” that helped put the fear of sovereign debt into the stock market a few weeks back. At that time, there simply weren’t enough bidders for Greek government bonds to complete the auction. But on Thursday it was a different story as Greece’s 5 Billion Euro auction of 10-year notes was more than three-times oversubscribed (meaning that there was 15 billion Euros in bids received), which is, of course, a good thing.

So, regardless of the fact that most of Europe appears to still be squabbling over who’s going to do what to help or not help Greece, the successful bond auction provided traders with an opportunity to breathe a sigh of relief.

Also falling on the positive side of the ledger was the same-store sales numbers from the nation’s retailers. Although the spin doctors have been out in force telling anyone who will listen that any and all economic data from the month of February should be adorned with an asterisk due to the series of blizzards that blasted the east coast, no spin was needed for the retail numbers.

Cutting to the chase, 79% of the retailers reporting on Thursday were able to put up sales numbers for February that were above the all-important consensus estimates. Despite the miserable weather, February’s good results marked the third month in a row that 70% or more of the retailers reporting beat expectations. It will suffice to say that the retail sector was rewarded handsomely on Thursday as Abercrombie (ANF) gained +14.6%, Zumiez (ZUMZ) was up +10.0%, Family Dollar rose +8.1% and Aeropostale (ARO) was up +6.5% on the session.

However, the spin doctors did have their work cut out for them after the report on pending home sales was released. While the Street was looking for an increase of 1% in the number of sales contracts written, the actual number of home sales pending dove by -7.6%. While the bears were quick to panic by suggesting that the number was abysmal given the extension of the tax credits for home buying, the National Association of Realtors countered with the idea that the weather-related weakness would likely be made up via a surge in the coming months.

While we’re on the subject of “spin,” the administration has already put the troops on the ground in preparation for what is expected to be another crummy jobs report this morning. Recall that economic advisor Larry Summers told CNBC earlier in the week that the weather would likely make the report look dismal.

But enough about speculation and spin, let’s get to the numbers. The Labor Department reported that Nonfarm Payrolls in the month of February fell by 36,000, which was better than the consensus estimates for a decline of 68,000 jobs. The nation’s Unemployment Rate held steady at 9.7%, which was below the consensus for 9.8%. There were revisions to the January payrolls as the Labor Dept. now shows January having lost 26K jobs, which was slightly above the prior report of 26K.

Running through the rest of the pre-game indicators, the overseas markets are higher across the board. Crude futures are up $0.48 to $80.69. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.66%. Next, gold is moving up $1.10 to $1134.20 and the dollar is lower against the Yen and Pound but higher against the Euro. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by about 50 points; the S&P’s are up about 7 points, while the NASDAQ looks to be about 11 points above fair value at the moment.

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

Wall Street Research Summary

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