Market Commentary

Stocks were initially pummeled yesterday
February 26, 2010

Stocks were initially pummeled yesterday as Moody’s Investors Service said it may cut Greece’s debt rating and US employment and durable goods orders missed forecasts.

Commenting briefly about Greece, I believe such a downgrade is expected.  However the visceral equity reaction suggests many equity traders are nervous about possible “Contagion Number 352.”  If I were witty I would write this is worse than the bazillion Nightmare on Elm Streets or Friday the 13^th sequels.

I think it is noteworthy treasuries were essentially unchanged in the wake of a potential credit downgrade for Greece.

Regarding the data, it missed expectations.  Contrary to last week where the data consistently surprised on the upside, statistics released week to date are the opposite.  I ask how much of this weakness is weather related?  As per the Weather Channel all 48 lower states had some type of snow covering during the reporting period. 

If it is weather related, will March/April data be skewed on the upside?

As inferred above, equities retraced about two thirds of yesterday’s decline ending only 50 points lower.  As written many times, transition points are always volatile as all grapple with conflicting data, perhaps amplified today given the events of the last thirty six months.

Today the first revision of fourth quarter GDP is released.  Consensus is expecting no change from the last month’s 5.7% announced pace.  Some are projecting fourth quarter growth might have surged by 6.5% while others are expecting a more moderate pace of expansion of 4.5%.  This data point can influence trading. 

Existing home sales and various regional manufacturing indices are also released.  What will these data points suggest?

Last night the foreign markets were up. London was up 0.75%, Paris up 0.87% and Frankfurt up 0.73%.  Japan was up 0.24% and Hang Sang up 1.03%.

The Dow should open moderately higher before a host of economic data released later this morning that might offer evidence of a sustained economic expansion.  The 10-year is off 3/32 to yield 3.65%.