MARKET WRAP – THE RALLY CONTINUES

Stocks were strong for the 8th day in the past 9 as the S&P 500 finished with gains of 0.45%.   In many ways, the rally off the recent lows of 1042 are the most impressive part of the entire 12 month rally.  A few stats on the recent move:

• The Russell 2,000 and the financials index have both risen in 20 of the past 23 sessions (87%).

• The financials have traded higher 9 sessions in a row.

• The VIX has traded lower in 17 of the last 21 sessions (81%).

• The Russell 2,000 is up 16.5% in just 23 sessions.

Some say the trend is your friend.  I say some trends are unsustainable.  Nonetheless, stocks remain in a robust move higher.  Volume today was moderate and breadth was strong again at 2:1.  The VIX traded higher again as investors reached for a bit of downside protection.  The beta trade is back in vogue as we mentioned above.  Tech and small caps were strong performers on the day.

From Daily Futures:

U.S. Economy
The U.S. Census Bureau said that wholesale sales were up 1.3% in January and up 10.5% from a year ago. Inventories were down .2% in January and down 9.7% from a year ago.

The U.S. Treasury sold $25 billion of 10-year T-notes at a median yield of 3.64% with a bid-to-cover ratio of 2.67. They also posted a budget deficit of $220.9 billion in February, roughly as expected. The June U.S. T-bonds ended down 4/32nds at 116.10/32nds.

Economists surveyed in the Blue Chip Economic Indicators newsletter said that real GDP will be up 3.1% in 2010 and up 3.0% in 2011.

The Mortgage Bankers’ Association said that its index of mortgage applications was up .5% last week. The rate on a 30-year fixed rate mortgage averaged 5.01%.

Grains and Cotton
The USDA’s 2009-2010 U.S. ending stocks estimate of:
Corn was increased from 1.719 to 1.799 billion bushels.
Soybeans was reduced from 210 to 190 million bushels.
Wheat was increased from .981 to 1.001 billion bushels.
Sugar was increased from 1.055 to 1.075 million tons.
Cotton was reduced from 3.3 to 3.2 million bales.

The USDA’s 2009-2010 world ending stocks estimate of:
Corn was increased from 134 to 140 million tons.
Soybeans was increased from 60 to 61 million tons.
Wheat was increased from 196 to 197 million tons.
Cotton was reduced from 52 to 51 million bales.

The USDA also said today that China bought 110,000 tons of U.S. soybeans for 2010-2011. May soybeans closed up 10.5 cents at $9.58.

A smaller palm oil crop in Malaysia is boosting prices for soybean oil (see article). May soybean oil closed up .65 at 40.95, the highest close in eight weeks.

July wheat fell 7.75 cents to $4.945, the lowest close in five months, after today’s increase in the U.S. and world ending stocks estimates.

Livestock
The USDA raised its average 2010 price estimate for choice steers from 88 to 89.5 cents per pound. June cattle closed down .60 at 91.72.

The USDA raised its average 2010 price estimate for barrows and gilts from 47.5 to 48.5 cents per pound. June hogs were up .17 at 80.65.

Orange juice
The USDA raised its estimate of the 2009-2010 Florida orange crop from 129 to 131 million boxes, but lowered the projected juice yield from 1.56 to 1.53 gallons per box at 42.0 degrees Brix. May orange juice was down .0020 at $1.4695.

Sugar
May sugar closed down .63 at 19.69, the lowest close in seven months, with more talk that upcoming sugar crops will ease the shortage. Brazil’s sugarcane harvest is due to begin at the end of this month.

Energies
OPEC’s monthly Oil Market Report shows an increase in the 2010 world oil demand estimate from 85.12 to 85.24 million barrels per day. Yesterday, the U.S. Energy Department predicted 85.5 million barrels per day. May crude oil finished up .57 at $82.43.

The U.S. Department of Energy (DOE) said that crude oil supplies were up 1.4 million barrels last week to 343.0 million barrels. Supplies of gasoline were down 2.9 million barrels and heating oil supplies were down 500,000 barrels.

The DOE also said that refinery use fell from 81.9% to 80.7% of capacity last week. Over the past four weeks, gasoline demand was up .5% from a year ago while distillate demand was down 4.1% from a year ago.

Metals
April gold fell $14.20 to $1,108.10, blamed on technical selling.

Currencies
The U.K.’s Office for National Statistics said that its index of production was down .4% in January and down 1.5% from a year ago.

Japan’s Cabinet Office said that machinery orders were down 3.7% in January. The March Japanese yen dropped .0070 to 1.1047.

Is world trade improving? China’s government said that exports were up 46% in February from a year ago while imports were up 45%.