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S&P Makes Big Regains

S&P regains half of bear market losses. It may not be exciting, but the S&P 500 has gained 1.9 percent in the first two trading days of the year. More importantly, we have retraced 50 percent of the losses in the bear market that occurred from the all-time high for the S&P 500 (1,576 on Oct 11, 2007) to the market low (666 on March 6, 2009). The 50 percent retracement was 1,116.

Santa Claus rally came right on target: the S&P 500 rose 1.4 percent in the last five trading days of 2009 and the first two trading days of 2010, exactly the historical average for the past 50 years, according to Stock Trader's Almanac.

Elsewhere:

1) Fertilizer business improving: yesterday, Credit Suisse made positive comments about the whole phosphate group, noting improving pricing trends, particularly in China where huge contracts were recently negotiated.

After the close fertilizer giant Mosaic, one of the world’s largest manufacturers of potash and phosphate, reported earnings slightly lower than expected, but the key takeaway is that volumes are up, average prices for phosphate are improving (potash is still negative, though it appears some kind of floor is being set now), and revenues for both segments are up as well.

Bottom line: there appears to be a bottom in the fertilizer business.

2) Family Dollar jumps 8 percent pre-open as its Q1 earnings topped expectations ($0.49 vs. $0.47 consensus) despite a disappointing 2.4 percent gain in same-store sales. The discounter reported higher traffic and margins as well as strong sales in consumable items.

For the current quarter, the retailer sees same-store sales rising a modest 2 percent to 4 percent and earnings of $0.65-$0.70 (vs. $0.64 consensus). However, sales are expected to improve more in the 2nd half of its fiscal year, with comp. store sales seen growing 3 percent to 5 percent.

3) US Airways down 2 percent after reporting disappointing traffic numbers for December. Unlike competitors Continental and UAL, which flew fuller planes last month, US Airways, saw its load factor FALL 1.0 percentage points to 79.3 percent.

The problem: US Airways flies predominantly domestic routes, which have been seeing notably lighter passenger loads across the industry. On the other hand, Continental and UAL have established a much greater presence in the international travel market. As a result, those two carriers have benefited from stronger growth in traffic along those international routes - offsetting their weakness in U.S. travel.

4) 3M is up 2 percent after being added to Goldman Sachs' conviction buy list. The brokerage believes 3M's strong start during the first two months on the fourth quarter "likely continued in December" and sees a further upside to earnings in 2010.

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