MARKET WRAP – A BIT OF BULLISHNESS BEFORE PAYROLLS

Investors added some risk heading into the payrolls report.   Stocks closed higher by 0.4% on the light volume.  Performance was mixed as financials rallied over 2%, homebuilders rallied 4%, retailers rallied almost 1% on positive guidance updates but tech remained subdued.  The VIX closed at 19 on the day – a new 52 week low.   The dollar rallied against most major currencies and dinged commodities prices on the day.  Daily Futures has the action from all markets.

U.S. Economy
The U.S. Labor Department said that jobless claims were up 1,000 last week to 434,000. The U.S. Labor Department will release its unemployment report tomorrow.

The International Council of Shopping Centers said that same-store sales at 32 retailers were up 2.8% in December.

Grains and Cotton
The USDA said that, as of last week, U.S. 2009-2010 exports of:
Corn improved from up 3% to up 5% from a year ago.
Soybeans remained up 38% from a year ago.
Wheat remained down 28% from a year ago.
Cotton remained down 37% from a year ago.
March cotton closed down .66 at 72.89, the lowest close in six weeks.

March soybeans fell 33 cents to $10.26 with concerns that China’s move to raise its interest rate slightly signaled a change that will eventually reduce its demand for commodities.

Livestock
The USDA said that net sales of beef totaled 4,300 tons last week, down from 5,800 tons the previous week. February cattle were down .02 at 85.92.

Sub-zero temperatures are in store for the north-central U.S. today and tomorrow. On Sunday, a warming trend begins. February hogs were up .52 at 67.10.

Orange juice
According to Dow Jones Newswires, Florida’s orange crop did experience some damage this morning, but it was “not catastrophic.” Weather.com said that temperatures in central Florida will dip slightly below 30 degrees on Saturday morning, but then should be warmer for the next week. March orange juice finished down .0090 at $1.4115.

Coffee
According to Dow Jones Newswire, Brazil’s Census Bureau expects the coffee crop to total 46.7 million bags in 2010. The USDA estimated Brazil’s 2009 coffee crop at 43.5 million bags. March coffee was up .0030 at $1.4190.

Energies
The U.S. Department of Energy said that underground supplies of natural gas were down 153 billion cubic feet last week to 3.123 trillion cubic feet. Supplies are now up 10% from a year ago.

Bitter cold temperatures continue to cover the north-central U.S., but a warming trend is expected to begin on Sunday. March natural gas dropped 18.5 cents to $5.756.

Currencies
Japan’s new Finance Minister, Naoto Kan, said that he favors a weaker yen. The March yen fell .0085 to 1.0740, matching the lowest close in over four months.

The People’s Bank of China said that the yield on their three-month bills inched up from 1.33% to 1.37%, the first increase in five months. Some are saying that this is a long-awaited sign of higher rates to come (see article).

Eurostat said that retail sales in the EU-27 were down .8% in November and down 2.1% from a year ago, weaker than expected.

Australia’s Bureau of Statistics said that retail sales were up 1.4% in November, more than expected and the best monthly gain in eight months. The March Australian dollar was down .21 at 91.23.

The Bank of England met and kept its interest rate unchanged at .5%, as expected.