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Curious timing here for the largest sell-off in several weeks (amazing that a 0.33% sell-off is “large” in this environment). There have been rampant rumors of window dressing, prop desk trading and risk asset purchases on the back of the Fed’s MBS program in recent weeks and as the quarter comes to a close and the Fed’s purchasing program ends the buying appears to have died down substantially.

Whether this is a sign of things to come or not has yet to be seen, but it is certainly curious. The market appears strenuously overbought and is pricing in very optimistic earnings and economic data in the coming weeks. Nonetheless, investors have been very complacent in recent weeks.

Not surprisingly, the volume was very weak yesterday morning as stocks rose and was heavy in the afternoon as stocks sold off. This has been a defining characteristic of the March rally. Breadth was weak at 2:1. The VIX rallied over 2% as investors reached for a bit of protection. Nonetheless, the VIX at sub 17 is still consistent with recent levels of complacency. Small caps were substantial underperformers on the day as investors pared back their high beta risk.

From Daily Futures:

U.S. Economy
ADP Employer Services said that they show a loss of 23,000 U.S. private sector jobs in March, weaker than hoped for. The June 2011 eurodollars closed up .055 at 98.445.

The U.S. Commerce Department said that factory orders were up .6% in February.

The Mortgage Bankers Association said that its index of mortgage applications was up 1.3% last week. The average rate on a 30-year fixed mortgage increased from 5.01% to 5.04%.

Grains and Cotton
The USDA expects growers in 2010-2011 to plant:
88.8 million acres of corn, up 3% from a year ago.
78.1 million acres of soybeans, up slightly from a year ago.
53.8 million acres of wheat, down 9% from a year ago.
13.9 million acres of spring wheat (not durum), up 5% from a year ago.
10.5 million acres of cotton, up 15% from a year ago.

Grains closed lower after today’s report and July wheat even fell 21.25 cents to a new contract low of $4.64. May cotton, however, closed up 1.01 at 80.55 in spite of this year’s increased acreage estimate.

The USDA also said that on March 1st, there were:
7.69 billion bushels of corn stocks, up 11% from a year ago.
1.27 billion bushels of soybean stocks, down 2% from a year ago.
1.35 billion bushels of wheat stocks, up 30% from a year ago.

May feeder cattle closed up 2.00 at 112.975, boosted by today’s drop in the corn price.

Half-way through the 2009-2010 season, cocoa arrivals at Ivory Coast ports are down slightly from the previous year. May cocoa was unchanged at $2,969.

The U.S. Department of Energy (DOE) said that crude oil supplies were up 2.9 million barrels last week to 354.2 million barrels. Supplies of gasoline were up 300,000 barrels and heating oil supplies were up 1.0 million barrels. June crude oil closed up $1.41 at $84.18, the highest close in eleven weeks.

The DOE also said that refinery use increased from 81.1% to 82.6% of capacity last week. Over the past four weeks, gasoline demand was up 1.5% from a year ago and distillate demand was down 1.0% from a year ago.

June gold closed up $8.80 at $1,114.50, helped by yesterday’s weaker U.S. dollar.

Statistics Canada said that real GDP was up .6% in January and up 1.3% from a year ago, the best monthly gain since December of 2006. The June Canadian dollar closed up .40 at 98.51.

Eurostat said that the unemployment rate in the EU-27 increased from 9.5% to 9.6% in February, the highest since August of 1998.

Eurostat also estimated that consumer prices in the euro zone were up 1.5% in March, more than expected. The June euro finished up .0089 at 1.3510.

Australia’s Statistics Bureau said that retail sales were down 1.4% in February, weaker than expected.

Housing starts in Japan were down 9.3% in February from a year ago, weaker than expected. The June yen dropped .0075 to 1.0703, the lowest close in over six months.