Today's Tidbits

End-of-Day Market Update

From Bloomberg: "U.S. stocks rose for the first time this week as improved earnings prospects at retailers and banks overshadowed a bigger-than-forecast drop in home sales and slowing demand for computer equipment...The S&P 500 added 10.46 points, or 0.8 percent, to 1,336.91. The Dow rose 46.9, or 0.4 percent, to 12,247. The Nasdaq Composite Index increased 14.28, or 0.6 percent, to 2,293.03. About five stocks gained for every two that declined on the New York Stock Exchange...The forecasts from J.C. Penney and Gap spurred speculation that the nation's chain stores will rebound from a lower-than-expected 0.5 percent gain in sales last month, the worst January since 1970, according to the International Council of Shopping Centers. Treasury notes tumbled, pushing the 30-year yield down by the most since 2004, as investors concluded that bond yields were too low given the Federal Reserve's determination to cut interest rates."
From RBSGC: "The cold reception to the 30-yr auction took the edge off of what had been a relatively firm market and broke the very recent range support. The weakness was not solely a bond affair as 2s, too, cracked behind 2%. Still, the curve steepened..." From Deutsche Bank: "US equity markets consolidate whilst Tsy yields rise sharply after poor 30Y auction, curve steepens...Fed's Lockhart says Fed’s main focus remains on economy, says ‘very concerned’ about house price moves.... Fed's Fisher says facing unprecedented inflationary forces from commodity prices, says Fed has to be careful not to stir up inflation." From Deutsche Bank: "With a complete lack of indirect bidders(10.7%), the street unwillingly underwrote the largest portion of any issue since the bond was reintroduced. As the tender level hit the tape 4.5bps cheaper than expected, the bids disappeared leaving the bond in a 2.5pt freefall to the lows...Interestingly, the curve has flattened since 1pm with the 5yr point leading the move."
From JP Morgan: "It sounds like the Senate is on the verge of passing the stimulus package ...their version of the bill will not include the net operating loss provisions (this would've been a windfall for otherwise struggling home builders) or the renewable energy tax credits. It will, however, include the GSE loan limit increases and rebate checks as well as the addition of payments to social security recipients and veteran disability payments. The market has obviously been exceedingly choppy this afternoon, w/ a round of spec selling and mtge-related paying in swaps taking us lower as well as smaller gyrations around what is happening in eqs." From UBS: "Treasury bond auction flops, Bonds lead a sharp decline: The Treasury today sold $9 billion of 30-year bonds at a yield of 4.449% in a disastrous auction, tailing the 1pm level by roughly 4bps. Indirect bidders accounted for a meager 10.7% of the auction (compares to 32.4% on average for the past 6 bond auctions) while the bid-to-cover ratio was a weak 1.82x as well. The poor demand almost certainly stems from long-end yields trading near historic lows and concerns that the Fed's actions may raise inflation prospects. Long term inflation expectations have exploded higher since the Fed's inter-meeting 75bp rate cut. Treasury bond yields spiked up sharply after the auction (bonds fell by >2 1/2 points on the day), and the 2s30s curve steepened 9.4bps as bonds sagged. We did see heavy long end Treasury buying as 30yr yields broke above 4.50%-- though the buyers were eventually overwhelmed by sellers by the close. TIPS breakevens widened across the board, and Treasury volume was 144% of the 30-day average...ICSC chain store sales measure was up 0.5% year over year in January. Finally, Dallas Fed president Fisher, who voted to leave rates unchanged at the last meeting, said that although the credit crunch has damaged growth, he still fears that aggressive easing would "juice up" inflation...Mortgages saw $4 billion in origination and about $2 billion in real money buying across the coupon stack. Lower coupons, particularly 5's, got hammered during the selloff, and MBS widened 3 ticks to Treasuries and 1 to swaps."
Three month T-Bill yield rose 10 bp to 2.19%.
Two year T-Note yield rose 14 bp to 2.06%
Ten year T-Note yield rose 17bp to 3.77%
Dow rose 47to 12,247
S&P 500 rose 10.5 to 1337
Dollar index rose .71 to 76.85
Yen at 107.49 per dollar
Euro at 1.448
Gold rose $10 to $910
Oil rose $1.21 to $88.35
*All prices as of 4:55pm