MARKET WRAP – MARKETS POSITION FOR BERNANKE ONSLAUGHT

Markets were quiet ahead of an onslaught of Bernanke speeches later this week.  The S&P lost 0.1%.  Volume was nearly non-existent and breadth was even for the bulls and bears.   It was a big change in trend for Monday’s which have been enormously bullish for the market in recent months.  A big merger between Smith International and Slumberger was unable to push the market higher.  Financials also rallied over 1%, but were unable to pull the rest of the market higher.  Perhaps most alarming was a dramatic change in analyst upgrades and downgrades.  We have often referred to Monday as “upgrade Monday” over the last 6 months as analsyts have worked tirelessly over the weekend’s in order to release an onslaught of upgrades each Monday.  That changed today as analysts actually downgraded 1.4 stocks for every upgrade today.  Of course, one day a trend does not make, but it’s something we will be keeping a close eye on as we expect earnings expectations to become a substantial headwind for the market in the latter half of 2010.

From Daily Futures:

U.S. Economy
A survey by the National Association for Business Economics expects economic growth to progress and the S&P 500 index to rise 23% over the next two years.

The Chicago Federal Reserve’s index of national activity increased from -.58 to +.02 in January, a sign of improvement. The March 2011 eurodollars closed up .065 at 98.67.

The U.S. Treasury sold $8 billion to 30-year TIPS at a median yield of 2.145% with a bid-to-cover ratio of 2.45.

Grains and Cotton
The USDA said that last week’s export inspections of:
Corn totaled 34.2 million bushels, up 20% from a year ago.
Soybeans totaled 35.0 million bushels, up 14% from a year ago.
Wheat totaled 17.7 million bushels, up 71% from a year ago.
July wheat closed up 12.75 cents at $5.295.

May corn closed up 11 cents at $3.827, its highest in four weeks, with concerns about heavy rains in South America.

May cotton closed up .72 at 79.70, the ninth gain in ten days, helped by talk of tighter supplies before this fall’s next harvest.

Livestock
April cattle were down .07 at 93.22 after Friday’s report showed February 1st cattle on-feed down 2.6% from a year ago, a little more than was expected.

April hogs closed up .65 at 70.30, helped by talk of good packer demand.

After the close, the USDA said that frozen pork in storage totaled 495.6 million pounds, down 18% from a year ago. Frozen bellies in storage totaled 53.6 million pounds, down 23% from a year ago.

Coffee – Brazil’s Crop Surprisingly Good
According to Bloomberg news, a private analyst said that Brazil’s coffee crop is in better shape than expected and may total a record high 55 million bags this year. Just last month, a Brazilian official was concerned that the coffee crop was damaged by too much rain. May coffee fell 5.15 cents to $1.3190.

Cocoa
May cocoa closed down $26 at $3,083 while political protests continue in the Ivory Coast. Ten days ago, President Gbagbo dissolved the government and a new government is being discussed.

Sugar
May sugar dropped 1.84 cents to 24.12, the lowest close in nine weeks, blamed on profit-taking at record-high prices.

Orange juice
Overall, temperatures in central Florida have been warming, but they make dip into the upper-30’s again on Thursday morning. May orange juice ended down .0020 at $1.3980.

After the close, the USDA said that there were 1.28 billion pounds of frozen orange juice concentrate in storage on January 31st, up 7% from a year ago.

Energies
Bloomberg news reported that the current U.S. winter season has been the coldest in nine years and also ranks in the coldest one-third of all winters over the past 115 years. May natural gas fell 14.4 cents to $4.977, pressured by adequate supplies.

Today’s 6 to 10 day forecast from the National Weather Service is expecting below average temperatures for most of the U.S.

Currencies
Real GDP in Taiwan was up 9.2% in the fourth quarter of 2009 from a year ago, helped by exports to China.