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NYSE MAC DESK MID-DAY MARKET UPDATE:

DOW 16,372 (-45 points), S&P500 18712 (- handles), Brent Crude $108.21/barrel (+$0.13), Gold $1,343.80/oz. (+$2.30)

MARKET DRIVERS: (Stocks have fluctuated north and south of the flat-line in a choppy session as traders weigh their increased confidence in the strength of the US economy against continued geopolitical uncertainty surrounding Ukraine.)

• The National Federation of Independent Business’s small-business optimism index for February came in at 91.4, down from 94.1 in January and short of Street expectations of a 93.4 reading.
• U.S. wholesale trade inventories for January were up 0.6% vs. consensus of +0.4% for the month.
• According to a statement from The Organization for Economic Co-operation and Development, (OECD), the U.S. Federal Reserve should proceed cautiously in scaling back its asset purchase program, while signaling its intentions clearly so as to minimize the impact on developing economies.
• U.K. industrial production in January slowed to 0.1% growth month-over-month from 0.5% in December, missing expectations of a 0.2% increase.
• German exports rose 2.2% and imports rose 4.1% — both above expectations, and marking the fastest rate of growth in two years — narrowing Germany’s trade surplus to 17.2 billion euros from 18.3 billion euros.
• Crimea’s parliament has voted to declare independence from Ukraine ahead of a referendum this weekend in which the region’s citizens will decide whether to join Russia.

Perhaps it is the dearth of earnings announcements and US economic data releases, but the market has spent much of the day “range-bound”; trying to decide which direction to go, while trading volume remains well-below average indicating a lack of participation and/or interest. This morning, after flirting with a new all-time intra-day high, (~1883), the S&P 500 followed European stocks to the downside at around Noon ET on what is being attributed to “Ukraine uncertainties”. The last report we noticed said something to the affect that Russia refuses to yield in the Crimean standoff, as Ukraine moves to bolster its defenses… No – we think you will agree that stocks are definitely not going to rally when something like that hits the tape… On a separate note regarding the potential future direction of the market, we received a “technical observation” from a certain Floor legend who has a tendency to dwell on ‘doom and gloom’ scenarios. (It is actually amazing that we get along so well.) Anyway, here it is, (take it for what it’s worth): “After closing at a 52-week high four days ago, the S&P 500 is higher now than it was then, but market breadth on average over the past four days has been negative. This has occurred at almost all major market peaks since 1940. There are also quite a few “false positives”, so watching near-term action is important. When this worked by identifying a market peak, it happened almost immediately, with stocks beginning their decline with little to no further upside in the days following.” (I particularly like how he hedged himself with the ‘false positives’ anecdote -— a good trader always hedges his position.)… Moving on, the Dow is wallowing near session-lows, and volume is very light, with just 230M shares on the tape at this time… Internally, breadth is mixed with issues and volume bearish while new highs to new lows are bullish (positive divergence). Advancing Issues: 1881 / Declining Issues: 2250 — for a ratio of 0.8 to 1. New 52-Week Highs: 218/ New 52-Week Lows: 9… Technically, the current trading-range is well-defined with S&P support at the 1865/1868-level and resistance at 1883/1886… Meanwhile, in the trading pits, gold is trading higher, extending gains for a second session amid the continued geopolitical uncertainty in Ukraine… The Bulldawgs are going for the first sectional State championship in school history tonight. Gonna Shock the World!! Have a tremendous day!

John’s Options Commentary: Traders are speculating on the market moving higher over the next 8 trading days. In the Spyders (SPY), with the index trading 187.95, a customer bought the underlying and sold the Mar 192 call at 12 cents, 25,000 times. In another bullish trade, it looks as if an investor bought the Mar 192-194 call spread for 9 cents-breakeven is 192.09, with a maximum profit potential of $1.91 (2.00-width between strikes prices minus .09- what customer paid for spread). There seems to be a lot of chatter around about markets peaking and charts looking very similar to 1929, and with those rumors about, the VIX is moving higher, up .30 to 14.50. On a contrary note, the volatility on the VIX at-the-money option (Mar 15 call) is getting slammed today-currently down 59.60% to 80.70%.

Sector Highlights brought to you by http://www.streetaccount.com/

• Tech the best performer with the S&P Information Technology Index +0.5%
o Semis outperforming with the SOX +0.5%. AMD +4.3%, MRVL +2.3%, TQNT +2.1% and ISIL +1.7% topping gains. AMD, TQNT and TXN +0.7% were all initiated buy at Ascendiant Capital Markets. The firm also initiated INTC (0.1%) with a sell rating. Note VECO +0.4% continuing its push higher from yesterday, when it rallied 6.8% on an upgrade from UBS. AIXG (0.9%) and AMAT (0.3%) the notable underperformers. The former was downgraded at Exane BNP Paribas this morning.
o Hardware outperforming. AAPL +1.4% in focus following an upgrade at Pacific Crest, which sees support for the stock from its ongoing cash production and sees potential for higher-priced iPhone 6 to spur growth next year. IBM +1.1% and STX +0.9% also outperforming. BBRY (1%) the laggard, continuing its move lower from yesterday when it fell 2.4%.
o Software mostly higher. CRM +3.6%, VMW +2.8% and ADSK +1.2% the notable performers to the upside. Note VMW adding onto yesterday’s 1.5% gain amid two sell-side price target increases. TIBX (0.7%) and INTU (0.2%) the notable underperformers.
o Internet space mixed. Recall the space was hit hard yesterday, with many of the names trading down >1%. TWTR +3.3%, LNKD +2.2%, AKAM +2% and NILE +1.4% topping gains. FB +0.4% had its target increased at Citi, which says it continues to see the company as the best growth story in the internet sector. BIDU (1.1%), AOL (0.9%) and P (0.4%) the notable performers to the downside.

• Healthcare beating the tape with the S&P Healthcare Index +0.3%.
o Specialty pharma names such as ACT +2.5%, PCYC +2.3% and FRX +2.1% outperforming. Note group has been a recent laggard on talk of profit taking.
o Med-tech/device space being led higher by WMGI +2.5% . Company reached agreement with FDA to file an amendment to the pre-market approval application for Augment Bone Graft. Street reaction was cautiously optimistic.
o Lab group higher with DGX +2.6% and LH +1.2%. Former announced acquisition of Summit Health, a provider of on-site prevention and wellness programs primarily for employers. No terms disclosed.
o Biotech outperforming with the NBI +0.8%. MYGN (9.1%) under pressure however on adverse court ruling

• Consumer discretionary outperforming with the S&P Consumer Discretionary Index +0.2%
o Restaurants outperforming. MCD +2.5%, SONC +2.1%, DNKN +2%, SBUX +1.8% and EAT +1.3% the notable gainers. Recall MCD fell 0.3% yesterday after reporting a decline in global comps for February. The company at BofA ML conference today that it is actively looking at ways to optimize their capital structure and noted they can probably get more aggressive. Downside limited, with DIN (0.2%) the laggard. PNRA (0.1%) lower after a downgrade at Longbow Research.
o Homebuilders outperforming with the XHB +0.8%. Note the space underperformed again yesterday. HOV +2.4%, LEN +2% and SPF +1.9% topping gains.
o Footwear and sporting goods mostly lower. SKX (1.6%) and CROX (1.1%) the notable underperformers. DKS +3.5% outperforming after reporting Q1 earnings in-line with expectations and reaffirming FY15 guidance. Analyst reaction was generally upbeat, highlighting the expense control for Q4.
o Retail underperforming with the S&P Retail Index (0.1%). Apparel space leading the way lower. AEO (5.3%), URBN (5.1%) and ANF (1.3%) the notable decliners. AEO reported Q4 results largely in-line with expectations, but guided Q1 EPS well below expectations due to a challenging retail environment and severe weather exacerbating weak demand. URBN missed on the top line. Analysts also pointed to management’s expectation for continued weakness at the Urban brand. ARO +4.1% the notable outperformer after it was initiated buy at Buckingham. CE space underperforming with HGG (1.3%), BBY (1.1%) and RSH (0.9%). FRED (0.6%) leading the off-priced space to the downside. Department stores outperforming, led higher by JCP +9.5% and M +2%. The former was upgraded at Citi, which thinks the company will be able to generate comps in line with FY guidance. M was upgraded at Wells Fargo, citing strong performance during a difficult holiday season. BONT (7.7%) the laggard after missing earnings and comps expectations, while also announcing its CEO won’t renew his employment agreement.

• Industrials underperforming with the S&P Industrials Index +0.03%
o Machinery outperforming. MTW +4.7% announced last night strong orders from CONEXPO. TEX +2.3% also outperforming. JOY +1.9% rebounding from yesterday’s selloff, while miners dismissed concerns of steel demand growth. NAV +3.5% other notable outperformer. Ag machinery also higher with AGCO +1.3% and DE +1.2%. Rental equipment outperforming, with HEES +0.5% and URI +0.5%.
o Building materials outperforming. Goldman Sachs commented this morning on its bullishness for US construction industry. USG +0.8% and EXP +1.1% leading gains. SWK +0.3% upgraded at Wells Fargo. MAS +0.6% and TXI +0.5% other notable outperformers
o Aerospace & defense broadly lower. TGI (1.3%) downgraded at RBC. LLL (0.4%), LMT (0.3%) and RTN (0.3%) other notable underperformers. WAIR +2.1% outperforming after upgrade at RBC. BAESY +0.6% and BEAV +0.4% also outperforming
o Transports mixed. Airlines continuing strong recent performance. ALK +0.8%, UAL +0.7% and DAL +0.5% leading gains. HA (3.9%) lagging after guiding Q1 PRASM lower than expected. Trucking mostly positive with CNW +1.8% and R +0.7% leading gains. MRTN (2.3%) lagging.

• Financials underperforming with the S&P Financials Index (0.3%)
o Banking group weaker with the BKX (0.7%). C (1.1%), STI (1.1%) and USB (1%) among the laggards. Not seeing anything specific behind the pullback. Group was a notable outperformer last week.

• Telecom the worst performer with S&P Telecom Index (0.8%)
o VZ (0.9%) and T (0.8%) the big drags on the space, extending their recent pullback. Not seeing anything specific behind the move, though the pricing war theme continues to get attention. Recall WSJ reported T is cutting prices on its wireless plans for second time this year. However, a separate Journal article did highlight increase in overall phone bills on back of shift to smartphones and surge in wireless Internet use. Softbank’s Masayoshi Son promised a price war if S +1.4% is allowed to acquire TMUS +3.9%. He expressed interest in pursuing a deal in an interview Charlie Rose last night. However, he is not expected to specifically address consolidation during a presentation in Washington this week.