Intraday Market Update
Enthusiasm was rampant in the pre-market as the weekly jobless claims report was in-line with estimates and mostly positive earnings reports helped boost sentiment. But the enthusiasm was short lived as equities traded straight down until noon but have since bounced nicely. The S&P 500 futures gapped +8 points higher at the open, sold off more than -20 points from their highs, and then bounced +10 points off of their lows. All of the major indexes have traded in a wide 2% range and are now firmly in the red being led by the tech heavy NASDAQ posting a -0.70% loss, followed by the Russell 2000 losing -0.40%, the S&P 500 shedding -0.60% (-7 points), and the DJIA sliding -0.40% (-40 points). Overseas, stocks in the Asia-Pacific region were mixed with no big winners or losers, while European markets gave up early gains with late day slide and finished mostly lower.

Cautious and contradicting comments from the Federal Reserve have made the headlines. Bank of St. Louis President James Bullard's comments seemed to exacerbate the selling. He said the "extended period" language being used by the Fed could bring "Japan-like risks," and that further quantitative easing would be the best way to avoid a deflation trap. He called on the Fed to consider buying more US Treasuries to avoid a "Japanese scenario." Bullard sees too much focus on interest rates as a monetary policy tool and a shift in the focus of policy should be sharp and credible. Of course he went on to say that a continuing economic recovery is the most likely outcome with no need for further Fed easing.

Meanwhile Federal Reserve Bank of Dallas President Richard Fisher said additional easing may create more problems as it may appear the Fed is politically connected and the Fed will not and cannot monetize the country's debt. He went on to say that uncertainty in the fiscal and regulatory outlook creates a problem for growth and that the passage of FinReg has not removed aspects of uncertainty due to additional upcoming events such as tax legislation. His outlook for GDP after Q1 is that it may be below 3% for a prolonged period of time and recent data has indicated the US is headed for slightly weaker growth rates.

Initial jobless claims fell -11,000 to 457,000 compared to estimates calling for a decrease to 460,000. Once again the prior week was upwardly revised by +4,000 to 468,000. The four week moving average, which gives a smoother look at the trend in claims, dropped by 4,500 to 452,500. This is the lowest level since May 8 when the average was 450,500. However, continuing claims rose by 81,000 to 4,565,000 compared to estimates calling for an increase to 4,500,000. The four week moving average for continuing claims was down -18,000 to 4,548,250, which is the lowest level since the December 2008.

Global oil companies Exxon and Royal Dutch Shell reported earnings this morning. Exxon (XOM) beat on the bottom line (almost doubling earnings on a y/y basis) but revenues were below estimates. Exxon's earnings were driven by downstream operations related to higher industry refining and marketing margins. Shell's (RDS/A) earnings were in line with estimates and its revenue grew by more than +40% over last year's levels. Shell's results were driven by higher production and cost cutting. Executives said they continue to see mixed signals in the global economy. Oil prices have remained firm so far this year, but refining margins, oil products demand and natural gas spot prices all remain under pressure. Our earnings and cash flow have rallied from 2009 lows, but the outlook remains uncertain. XOM is down about -1% while RDS/A is breakeven.

Visa reported earnings after the bell yesterday that beat estimates and offered strong guidance. However, executives warned that the regulatory changes unveiled by Congress over the last several months would impact the company's business. On the conference call Visa's CFO refused to quantify the possible impact, noting only that there would be a "modest impact" in 2011. Shares of Visa are down -4.5%. Moody's (MCO) managed to beat earnings estimates but offered a cautious outlook in due to the regulatory changes and uncertainty in the credit markets. Shares of MCO are +4.25% higher.

Symantec and NVIDIA are both off about -10% after SYMC reported earnings in line with estimates but missed revenue estimates and lowered its Q2 guidance. The firm's CEO said that during the quarter the company saw "lengthening of procurement cycles driven by continued cautiousness among IT buyers." NVDA also lowered its Q2 revenue forecast to a range of $800 to $820 million, from its previous forecast of between $950 to $970 million.

Core Sector List:
Overall reading: 8 sectors advancing, 8 sectors declining
Strongest Sectors: Broker Dealers, Home Construction, Oil Services
Weakest Sectors: Semiconductors, Utilities, Retail


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