Reply #46: 12:24 EST numbers and blather

[UpInArms]

Dow 11,234.11 -45.86 (-0.41%)
Nasdaq 2,312.38 -0.44 (-0.02%)
S&P 500 1,299.56 -3.39 (-0.26%)
10-Yr Bond 4.703 +0.28 (+0.60%)

NYSE Volume 944,935,000
Nasdaq Volume 954,165,000

12:00 pm : The market still trades with a sense of caution midday as a lack of market-moving news prompts investors to take a bearish cue from Treasuries and weigh whether or not the Fed will alter their view on monetary policy. Fed funds futures have fully priced in the odds of another 1/4% interest rate hike to 4.75% tomorrow (2:15 ET) after the FOMC concludes its first meeting not chaired by Alan Greenspan in 19 years and priced in a 76% chance of a hike at the May 10 meeting. Briefing.com chief economist Tim Rogers -- the only prognosticator to rank in the USA Today's top 10 all three years -- does not see a lot of inflation pressures and believes the Fed will raise rates just once more this year after Tuesday.

Since Fed Chairman Bernanke has given no indications of his policy leanings and economic conditions have not changed, there is more of a risk that Tuesday's policy statement will be a disappointment, concern which has removed some of the optimism that has underpinned recent market strength. After closing at the highest since May 2001 on March 17th, the S&P 500 struggles to stay on pace to capture its biggest first-quarter gain in seven years.

With regard to sector strength and weakness, seven of ten economic sectors are trading lower. Health Care remains the most influential leader to the downside following analyst downgrades on medical equipment stocks (e.g. ZMH, SYK) and consolidation in the drug group. Consumer Staples is also under pressure following an earnings miss from Walgreen (WAG 44.26 -0.11) while Financial has lost ground after Lehman downgraded bank stocks worldwide on valuation concerns and amid weakness in Treasuries. The absence of market moving economic reports -- data which the Fed has made clear will influence monetary policy -- has left bond traders focused on technical indicators and kept volume lighter than usual ahead of tomorrow's Fed decision. The yield on the 10-yr note (-08/32) currently stands at 4.70%.

The lack of conviction on the part of buyers is further evidenced by the fact that Materials -- the least influential of the economic sectors -- leads the list of only three sectors posting gains. The sector has gotten a lift following analyst upgrades on Phelps Dodge (PD 76.89 +1.75), a suggested holding in our Active Portfolio, and Alcan Aluminum (AL 45.80 +0.50), which has provided a boost to Alcoa (AA 30.53 +0.70), the Dow's best performing component. Technology has also shown relative strength led by an analyst upgrade on Intel (INTC 19.85 +0.25), another suggested holding. DJ30 -30.34 NASDAQ +1.18 SP500 -2.86 NASDAQ Dec/Adv/Vol 1666/1234/847 mln NYSE Dec/Adv/Vol 1967/1120/573 mln

11:30 am : Little changed since the last update as the major averages vacillate in roughly the same ranges. Semiconductor has recently inched back into positive territory but still struggles to keep the Nasdaq above the flat line as weakness has also been realized in software (e.g. ADBE, ADSK, INTU), biotech (e.g. AMGN, GENZ, GILD, MEDI), retail (e.g. SPLS, COST, URBN, ROST) and human resources (e.g. MNST). DJ30 -33.22 NASDAQ +0.12 SP500 -2.60 NASDAQ Dec/Adv/Vol 1685/1179/750 mln NYSE Dec/Adv/Vol 1937/1142/508 mln