Tuesday Market Recap

Its Tuesday and we are back to watching scrolling/flashing numbers on our monitors (some were doing just that yesterday, but I was winding up a camping trip), as the market waited for FOMC minutes and clues as to the next round of stimulative policy actions (QE2...).  Well, the minutes were released and just what everyone thought would be included was (I'll paraphrase): "Holy cow, its not working like we thought, lets do some more."  On this, bonds rolled over and equities went positive, guess we know what is driving the markets.  This should tell us a lot.  Investing on hoped for policy actions cannot be sustained (as they say, hope is not a strategy) and typically ends up bad.  Thoughts?? (yeah, I keep asking, but to no avail).  Anyway here's some numbers:

Fixed Income:

Lower secondary volume than usual today and decliners lead advancers in IG space (0.84x).  High yield just kept on rolling with an advance/decline ratio of 1.04x.  Citi's bonds lost some ground today, and financials were the most active today (only 2 of 10 that weren't financials were Hess (Baa2/BBB) and Anadarko (Ba1/BBB-) with Hess down and APC up).

The curve:

Treasury 30-year bonds yielded a record 1.39 percentage points more than 10-year notes on speculation the Federal Reserve will buy medium-term debt as it tries to keep down borrowing costs.The longest maturities, those most sensitive to inflation, lagged behind shorter-term notes after the Fed said yesterday is prepared to ease monetary policy to keep costs in the economy from falling. The Treasury is scheduled to sell $21 billion of 10-year notes today and $13 billion of 30-year bonds tomorrow. 

Good day for German Bunds, JGBs rolled over, Britain rallied and AUS steepened as the long end sold off.


Equities:

First the numbers:

Financials lead the pack higher on favorable FOMC minutes:  Here's some intraday:

Financials intraday:

On the growth/value front, no change:

Midcap continuing its lead versus small caps (I still think its too early for small caps, and I am looking for signs of real growth to determine a fundamental and sustainable inflection point):

ForEx:

Apparently, forex traders believe that further quantitative easing will be detrimental to the dollar (ya think?).


Errata:

The FDIC, which had delayed its vote at the request of members of the Financial Stability Oversight Council, today proposed a temporary rule asserting that all creditors must be prepared to absorb losses in an agency-run liquidation. Some may continue to receive payments to maintain system stability or maximize recoveries, the FDIC said. Attempting to assuage banking-industry uncertainty about how creditors would be treated in a resolution, the FDIC included a provision barring shareholders, long-term bondholders and subordinated debt holders from bridge entities formed to manage healthy parts of failed firms. Some short-term creditors might be brought into a bridge entity if they are deemed essential to its operation.


Well, there ya have it - QE2 cementing the administration policy entitled "stocks go up always".

Good luck, lets be careful out there.