Update: S&P 500 Briefly Surpasses All-Time Closing High

Stocks are moderately higher out of the gates this morning, following a mixed session out of Europe/Asia and another volatile day in the market yesterday.  The S&P 500 is flirting once again with its all time record high of 1,565.15, momentarily hitting a new all-time high of 1,565.40 just moments ago before facing stiff technical resistance. Set to close out a strong quarter with the Dow poised to book its best first quarter since 1998 (up +11%), investors are shifting focus away from Cyprus to data about the U.S. economy, which has been showing steady improvement, despite weaker than expected data this morning.

Areas Of Focus Today:

Mixed GDP And Jobless Claims Data – The number of Americans filing new claims for unemployment benefits rose more than expected last week, but probably not enough to suggest the labor market recovery was taking a step back. Also, the U.S. economy expanded at a sluggish pace in the fourth quarter although a big gain in business investment and higher exports of services led the government to push up its previous estimate for growth. Gross domestic product expanded at a 0.4 percent annual rate, just below the 0.5 percent gain forecast by analysts in a Reuters poll. The growth rate was the slowest since the first quarter of 2011 and far from what is needed to fuel a faster drop in the unemployment rate. It was, however, higher than the government’s previous estimate of a 0.1 percent growth rate. Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 357,000. Still, they remained in the middle of their range for this year. The prior week’s claims figure was revised to show 5,000 more applications than previously reported. Economists polled by Reuters had expected first-time applications last week to rise to 340,000. Last week’s increase pushed claims above the 350,000 level for the first time since mid-February. Furloughing and layoffs related to sequestration, which should accelerate over the month, could however, put upward pressure on the series in the near future.

Regional Manufacturing Conditions Weaken – The February Chicago PMI tumbled from 56.8 to 52.4, the lowest since December and far below expectations of 56.5 – the biggest miss in 11 months. Any reading over 50 on the index, however, indicates growth.

Cyprus Update – Everyone expected bank runs in Cyprus today when banks opened their doors after a two-weeks long closure forced by contentious negotiations with the EU over how to bail out the banking system. The banks re-opened at 6 AM ET, though, and so far, there are no signs of a run on the banks. This is probably due to the restrictive capital controls enacted by Cyprus to counter a run – Cypriots are only allowed to withdraw a maximum of 300 euros per day for the next week. The haircut forced on uninsured depositors and a previous plan to levy a nationwide “tax” on all deposits has likely shattered confidence in the safety of Cypriot bank accounts.

Q1 Performance Review – Looking at global returns for the quarter, the two countries with the easiest/most accommodative central banks dominated among major indices (U.S. and Japan)  The only other major countries that were even positive were the UK (fractionally), Australia, and Mexico.   Germany, France, Italy, Spain, China, India, Brazil, Canada – all down. It was also a very interesting quarter for sector leadership – technology and materials lagged, with safety the place to be for Q1. Despite cyclicals and financials leading early on, healthcare and consumer staples were easily the best performing sectors overall.

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