MARKET WRAP – STOCKS STAGE A HUGE TURNAROUND

Stocks rallied over 3% today as comments from China sparked a huge amount of short covering.  From a purely technical perspective today was an enormously constructive day.  Volume was above average, it was a 90% up day and breadth was very strong at 12:1.  Unfortunately, nothing has really changed from a fundamental perspective so it’s safe to say that the choppiness of the last few days has been nothing more than confused price discovery.  Credit markets were marginally improved on the day.  All in all, it looks like the market is recovering from enormously negative sentiment and deeply oversold conditions. It’s difficult to get too excited, however, as nothing has changed in terms of the fundamentals.

From Daily Futures:

Currencies
The People’s Bank of China expressed confidence in Europe and said that it supported Europe’s efforts to resolve the debt crisis. The June euro jumped up 1.78 cents to $1.2379 and most commodities were steady to higher.

U.S. Economy
The U.S. Commerce Department said that real GDP was up .75% in the first quarter and up 2.5% from a year ago, less than expected. Current GDP totaled $14.6 trillion, up nearly 3.0% from a year ago. The June U.S. T-bonds fell 1.17/32nds to 122.30/32nds, pressured by China’s support for Europe (see article).

The U.S. Labor Department said that jobless claims were down 14,000 last week to 460,000, more than expected.

The U.S. Treasury sold $31 billion of 7-year T-notes at a median yield of 2.75% with a bid to cover ratio of 2.88.

Grains and Cotton
The USDA said that, compared to the four-week average, last week’s net sales of:
Corn were down 22%.
Soybeans were down 38%.
Wheat were down 27%.
Cotton were up 15%.

July soybeans closed up 13.75 cents at $9.517 with favorable planting weather expected in the midwestern U.S. in the next two weeks.

Livestock
The USDA said that net sales of beef totaled 17,800 tons last week, up 19% from the four week average. August cattle closed up .85 at 90.77.

Lumber
Yesterday, July lumber closed limit-down after a better-than-expected 14.8% increase in April’s new home sales. Today, July lumber finished up $4.10 at $229.10.

Orange juice
The National Oceanic and Atmospheric Administration said that it expects 14 to 23 named storms in the Atlantic Basin this year and 3 to 7 of those could be major hurricanes. July orange juice closed up 1.60 cents at $1.4120.

Energies
July crude oil jumped up $3.04 to $74.55, helped today by China’s comments. British Petroleum’s “top kill” effort appears to be showing some progress, but so far, the leak continues, now in its 37th day.

The U.S. Department of Energy (DOE) said that underground supplies of natural gas were up 104 billion cubic feet last week to 2.269 trillion cubic feet. Supplies are now up 3% from a year ago. July natural gas closed up 11.5 cents at $4.294.

More Currencies
Canada’s corporations earned C$62.9 billion of operating profits in the first quarter of 2010, up 4.8% from the previous quarter and up 23.4% from a year ago. The June Canadian dollar closed up 1.27 cents at 95.20.

Japan’s Finance Ministry said that exports were up 40.4% in April from a year ago, more than expected. The June Japanese yen fell .0097 to 1.1011 after China voiced its support for Europe.