Morning Note...

Futures +35bps this morning as Advance Retail Sales surprise to the upside.  February sales were +0.3% vs. the -0.2% expectation.  However, the prior reading was revised downward to +0.1% from +0.5%.  Retail Sales Less Autos came in at +0.8% vs. +0.1% expected.  Add this to the February Consumer Credit +$5 billion surge (posted around the close last Friday), a “healthy consumer” picture begins to develop, thus buoying equity markets.  In other economic news, the WSJ and the FT report this morning that US household debt contracted 1.75% in 2009.  Federal borrowing was up 22.7% last year, and state and local government borrowing was up 4.8%.  Business borrowing fell 1.8% after rising 5.2% in 2008.  Note that the 1.75% consumer debt contraction marked the sharpest since the 90’s.  In political news, the WSJ reports that Obama will nominate San Fran Fed President Yellen – a noted dove – to replace the retiring Donald Kohn as vice chairman of the Fed.  In corporate news, retailer Aeropostale (ARO) beat earnings estimates and trades higher.  Retailer HIBB also reported better, but PSUN, ZQK, and ZUMZ disappointed.  Further, NPD’s video game sales data was worse than expected, falling 15% year-over-year.  So is the consumer healthy or not?  (More on that below.)  For those interested, here’s a look at the top 10 games (publisher, platform, units in parentheses):

             1. BioShock 2 (Take-Two Interactive, Xbox 360) - 562,900

             2. New Super Mario Bros. Wii (Nintendo, Wii) - 555,600

             3. Call of Duty: Modern Warfare 2 (Activision, 360) - 314,300

             4. Just Dance (Ubisoft, Wii) - 275,400

             5. Wii Sports Resort (Nintendo, Wii) - 272,500

             6. Call of Duty: Modern Warfare 2 (Activision, PS3) - 252,800

             7. Mass Effect 2 (Electronic Arts, 360) - 246,500

             8. Dante's Inferno: Divine Edition (Electronic Arts, PS3) - 242,500

             9. Dante's Inferno (Electronic Arts, 360) - 224,700

            10. Heavy Rain (Sony, PS3) - 219,300

Looking ahead, the NPD Group anticipates a rebound for March, led by the arrivals of Final Fantasy XIII, God of War III, and the Nintendo Dsi XL and says “strong new releases, and Easter gift-buying bodes well for industry performance in March.” 

University of Michigan Confidence Survey and Business Inventories are due around 10am today. 

Ten up days in a row?  Isn’t that a record?  We haven’t seen a down day since February 25^th.  And we’re +10% off the Feb 4^th intraday 1044.50 S&P tick… Based on my perspective from the cheap seats, isn’t it time to pause and ask “What’s Next?”  Q1 earnings have successfully passed.  The Greece issue is resolved.  (Or is it?)  China continues to show signs of an overheated economy and there’s a real possibility of monetary tightening there.  U.S. Treasuries continue to meet stellar demand at market.  (Or do they?  Who is buying?)  Quantitative easing in the U.S. is slated to expire this month.  QE in the U.K. will probably be prolonged, perhaps for political reasons as Gordon Brown hopes for re-election on the back of “fragile economy” fear tactics.  Credit Default Swap regulation gathers momentum, also largely political, as European politicians need to be seen as doing something to stave off a European Union collapse.  Financial regulation on this side of the pond looks to be going the way of Healthcare reform:  bumbled, bipartisan, and misguided.  Unemployment remains at utterly ridiculous levels.  Most of these amount to known knowns, and those “open-ended” issues (Greece, regulation, etc.) represent the known unknowns.  And surely there are some unknown unknowns ahead.  And is the consumer back?  Or are people foolishly slapping more on their credit cards while simultaneously letting their mortgages slip?  Meanwhile, the equity markets – as measured by the S&P500 – continue a relatively light volume creep upwards toward (and perhaps beyond) the upper end of the most recent trading range (1150ish).  Many bulls feel that “performance chasing,” i.e. managers forced to jump in and buy after watching this upward drift over the past couple of weeks, could be the “upward snowball effect” that breaks us out of the range.  Stay tuned…

For those that feel the market is a little “top-ish,” here’s some “trader talk” from the Barclay’s desk (and for the opposing sentiment, see quote section below):

SPY has closed higher on 10 of the last 10 sessions which has never happened in the past decade.  16 of the last 18 have been green too which also hasn't happened.  The rally has been very beta-led ... IWM (Russell 2000) has outperformed SPY by ~7% over the past month, sentiment indicators are reading super bullish, and it’s the crowded longs that are rallying the most ... all usually indicators of a reversal.

POT raises guidance.  ANN lower on 6c beat.  DBAB ups SCCO.  PIPR ups ARO.  CITI cuts ABT.  BERN ups NSM.  FBRC cuts PSUN.  KKR files for $2+ billion IPO.  AGU terminates offer for CF.  BAMM higher on earnings, buyback.  BSY higher on talk Murdoch may take it private.  CTRN higher on earnings.  IPI, MOS higher on POT news.  MWA rated Conviction Sell at GSCO.  MSCO cuts NFLX.  RFMD higher on Cramer comments.  SHFL misses by 1c. 

Asia mixed overnight.  Europe ~50bps higher.  USD -50bps.  Oil +1%.  Gold +40bps.

S&P 500 PreMarket 8:30am (last/% change prior close/volume): 

PALL CORP                    39.00    -4.51%  12182

RADIOSHACK CORP        21.975  -3.45%  1000

HUNTINGTON BANC        5.58      +3.33% 179514

VORNADO RLTY TST      75.395  +3.08% 200

NATL SEMICONDUCT      14.75    +2.86% 284054

SCHWAB (CHARLES)       18.56    -2.83%  159558

AMERICAN INTERNA       36.10    +2.82% 416885

KEYCORP                       8.10      +2.79% 24058

MICRON TECH                10.07    +2.76% 310579

Today’s Trivia:  So the song below is basically about the dawning of a new age of peace, love, and happiness – oft associated with the hippie/New Age movement of the 60s and 70s.  So are we currently in the Age of Aquarius?  Just when is this supposed to take place?

Yesterday's Answer:   On March 11^th, 1970, “Aquarius/Let The Sun Shine” won the Grammy for Best Song.

Best Quotes:  “Good Morning - Mr. Mojo rising.   Got to keep on rising.   What a difference a year makes.  Look at the headlines in today's WSJ, and you'd have to think everything is right in the world.   The Americans are pairing down debt?   Can you believe that people in this country are actually learning a lesson.   These types of headlines also help the wealth effect, so I don’t expect people to remain fiscally responsible for long.   So there is opportunity for growth.   It also feels that the market is starting to take on a more directional trade.   I am happy that it is up, but any sort of consistent direction should get the volumes to return.  It loosen the purse strings, creates opportunities.  Dislocations in the market.   Constructive capital raises, not balance sheet capital raises.  More M&A.   All good things.   I am very bullish this morning and you should be too…1151.50 was the year high yesterday.   1221.25 is the Seventy Six week high.   Yes that is on my levels sheet.”  --trader talk