MARKET WRAP – THE SURE BET CONTINUES

Equity markets were up once again as investors pile into risk assets in anticipation of a positive jobs report tomorrow.  The S&P closed with gains of 0.35%.   Investors have been conditioned to ignore all bad news because of “weather” and the “lunar new year”.  That is  not a typo.  JP Morgan analysts actually get paid hundreds of thousands of dollars a year to come up with that kind of mind bending analysis.    The result is an incredible and almost palpable feeling of complacency in the market.

The VIX continued its losing ways and has now extended its incredible losing streak to 16 of the last 17 days (today’s losses were marginal, however).  The Russell 2,000 (i.e., high beta) extended its winning streak to 16 of the lat 19 days.   These are unmatched moves in the entire duration of the move higher since March 2009 – remarkable does not suffice – jaw dropping is more adequate.  Volume was the lowest it has been since the end of year holiday’s.  To say that these buyers lack conviction is an understatement.  Breadth was marginally positive at 1.3:1.   Tomorrow’s jobs report is where the puck is right now and investors are skating towards it with a feeling of “heads I win, tails I win”.  In other words, analysts are going to spin this number no matter what it is.   The more important question is, who will buy it?

From Daily Futures:

U.S. Economy
The U.S. Labor Department said that jobless claims were down 29,000 last week to 469,000, roughly as expected. Tomorrow morning, the monthly unemployment report will be released.

The National Association of Realtors said that its index of pending home sales was down 7.6% in January, weaker than expected. From a year ago, the index was up almost 9%.

The U.S. Commerce Department said that factory orders were up 1.7% in January, roughly as expected.

The U.S. Labor Department said that non-farm productivity increased at an 5.8% in the fourth quarter of 2009 from a year ago. Unit labor costs were down 4.7% from a year ago. The June U.S. T-bonds finished up 17/32nds at 117.26/32nds.

Grains and Cotton
The USDA said that, as of last week, 2009-2010 exports of:
Corn improved from up 6% to up 7% from a year ago.
Soybeans remained up 34% from a year ago.
Wheat improved from down 23% to down 22% from a year ago.
Cotton improved from down 27% to down 25% from a year ago.
May corn closed down 3.75 cents at $3.83.

July wheat closed down 13.75 cents at $5.145, vulnerable to today’s higher U.S. dollar.

Livestock
The USDA said that net sales of beef totaled 5,200 tons last week, down from 8,000 tons the previous week. June cattle were up .20 at 91.67.

Coffee
May coffee closed down 1.90 cents at $1.3020, continuing to disappoint those that were talking about tighter coffee supplies this year.

Energies
The U.S. Department of Energy said that underground supplies of natural gas were down 116 billion cubic feet last week to 1.737 trillion cubic feet, a smaller drawdown than expected. Supplies are now down 4% from a year ago. May natural gas fell 17.8 cents to $4.643, the lowest close in over a year.

Metals
April gold closed down $10.20 at $1,133.10, pressured by today’s higher U.S. dollar.

Currencies
The Bank of England met and kept its interest rate unchanged at .50%, as expected.

The European Central Bank met and kept its interest rate unchanged at 1.00%, as expected. Also, Eurostat said again that real GDP was down 2.3% in the fourth quarter from a year ago. The March euro closed down .0123 at $1.3577.

Statistics Canada said that building permits totaled C$5.7 billion in January, down 4.9% from December, but still up 33% from a year ago.

Japan’s Finance Ministry said that business investment was down 17% in the fourth quarter from a year ago, the eleventh consecutive negative quarter. The March yen closed down .0090 at 1.1224.