Intraday Market Update

Risk aversion appears to be the order the day as U.S. stocks are under pressure and European stocks closed lower. The S&P 500 retreated about -9 points from its intraday high of 1,191.80 yesterday - the highest levels seen since September 2008 - before bouncing back to 1,188 in early afternoon trading. Continued chatter in Europe about Greece's debt problems sent the premium investors demand to hold 10-year Greek bonds to their widest level since 1998 on speculation the country could default. The 10-year Greek/German government bond yield spread widened to 412 bps, its largest gap in the lifetime of the Euro currency. According to credit default swap monitor CMA DataVision, the cost of protecting Greek government debt against default for five years rose to 401.2 bps at the New York close on Tuesday. This means the cost rises to 401,200 Euros to protect 10 million Euros worth of Greek government bonds.

The Mortgage Bankers Association purchase index was up +0.2% last week, adding slightly to prior gains. But mortgage rates are the big headline, jumping 27 bps for 30-year loans to 5.31%. The report blames the increase in rates on the Fed’s decision in March to stop purchasing mortgage-backed securities. The jump in rates dried up demand for refinancing with the index down -16.9%. The jump in rates will hurt more than refinancing and is certain to limit demand for home purchases at a critical time for the housing sector which is trying to recover from a deep drop following November's expiration of first-round stimulus.

On capital hill, former Fed Chairman Alan Greenspan gave testimony, defending his record and talking down to Congress. Greenspan rebuked critics by pointing out that Congress pushed the Federal Reserve to ensure lending to poorer Americans kept rising in the 2000’s. He also told the committee that making it easier for poorer American’s to get mortgages didn’t push the country into crises, but Wall Street’s drive to package the loans into opaque securities helped do so.

In equities, solar stocks are doing well after JA Solar spiked over +10% on strong Q1 shipment guidance. Earnings from agriculture leader Monsanto also made the news this morning. The company narrowly missed earnings estimates and guided to the low end of their prior FY2010 EPS guidance. Executives said the company would be unlikely to achieve its target of doubling its gross profit in the 2007 to 2012 period. Shares of MON traded off 3% on the news, but bounced back and are now trading down -1.80%. In other earnings, Family Dollar beat earnings expectations and raised its 2010 outlook. Shares of Family Dollar are up +4.23%. Equipment rental name Tractor Supply Company offered very strong Q1 guidance and hiked its 2010 view. Shares of TSCO were up +10% in early trading before retreating to +7.50%. Shares of CKE restaurants are up +8% after stating the firm has received an offer superior to Thomas H. Lee Partners' $11.05/shr offer on Feb 26.

Commodities:
With economic data and corporate news again scarce, investors are sending precious metals out to highs last seen in early January. Gold is trading above $1,150 per ounce and silver is above $18.00. Front-month crude is taking a breather with the contract hovering around the $86.50 per barrel, down -0.20%. Its recent rally has been stalled by larger than expected builds in weekly crude and distillate stockpiles. Natural gas is down by -0.50% while copper is off by -0.25%

International Markets:
The only major Asia-Pacific market to close lower on Tuesday was China’s Shanghai Index which was down -0.33%. The Hang Seng index led the gains tacking on +1.82%, followed by Thailand and Singapore both adding about +0.50%.

In Europe the markets did not fare quite as well. All of the major European markets were down with the exception of Spain. Spain’s IBEX 35 managed to eek out a gain of +0.28%. The losers were led by France (-0.67%), Italy (-0.76%), and Germany (-0.48%). London’s FTSE 100 lost -0.32%.

Core Sector List:

Overall Reading: 10 sectors declining, 6 sectors advancing Strongest Sectors: Gold Miners, Broker/Dealers, Semiconductors Weakest Sectors: Oil, Oil Services, Home Construction

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