*SCALPSWINGSTRADDLE*

[Zephyr]

U.S. stock futures edge up as yen falls

Year's rally largely intact as sequestration deadline looms

By Kate Gibson and Carla Mozee, MarketWatch

Last Update: 2/18/2013 12:03:27 PM

NEW YORK (MarketWatch)--U.S. stock-index futures on Monday tilted slightly higher
in limited trade, with U.S. markets shut for Presidents Day; European shares and
industrial metals fell on concerns about the global economy, in particular the
euro zone, with Italian elections adding to investor uncertainty.

The yen continued its decline against other currencies, including the U.S.
dollar, after leaders from the world's 20 largest economies vowed not to devalue
their currencies to bolster exports and bypassed criticizing Japan for indicating
its expansionist monetary policies would continue.

Worries about an unclear outcome in Italian elections held Sunday and Monday hit
European equities, with yields on Italy's 10-year government notes climbing above
4%.

Futures for the Dow Jones Industrial Average rose 6 points to 13,954. Those for
the Standard & Poor's 500 gained nearly 1 point to 1,517.90. Futures for the
Nasdaq 100 rose 3.25 points to 2,764.50.

Crude futures for March delivery fell 31 cents to $95.56 a barrel in electronic
trade in New York. The more active April contract declined 34 cents to $96.07 a
barrel.

And, with a deadline in the battle over the U.S. budget just 11 days away, equity
investors are considering whether likely federal spending cuts will spark a
market correction from multiyear highs.

March 1 is when $85 billion in reductions to defense and domestic programs
through the fiscal year ending Sept. 30 go into effect unless congressional
leaders and the White House cut a deal to replace the automatic cuts.

Part of a larger program known as sequestration, the cuts aim to trim federal
spending by roughly $1 trillion over nine years.

Read Political Watch: Not all 'sequester' cuts would hit at same time.
(http://blogs.marketwatch.com/election/2013/02/15/not-all-sequester-cuts-would-hit-at-the-same-time/)

Economists have warned the spending reductions will dent growth in the world's
largest economy. Treasury Secretary-nominee Jack Lew last week in Senate
testimony said the automatic budget cuts "would impose self-inflicted wounds to
the recovery and put far too many jobs and businesses at risk."

Read more on Treasury secretary-nominee Lew's hearing.
(http://www.marketwatch.com/News/Story/Story.aspx?guid={94CD2A5C-760D-11E2-96E1-002128040CF6}&siteId=mktw)

Senate Democrats late last week proposed a $110 billion plan to postpone federal
cuts that would include tax hikes that Republicans have said they would not go
along with.

With the Senate now in recess until Feb. 25, and with Democrats and Republicans
far from agreeing to a resolution, investors have been wondering if the lack of
clarity from Washington will trigger a sharp pullback in U.S. stocks.

At the moment, "the stock market seems to be somewhat impervious to this matter,"
said Tim Speiss, who as chairman of personal wealth advisers at EisnerAmper
manages $700 million in assets.

Recalling sharp fluctuations in the market as lawmakers in July and August 2011
wrangled over the budget, leading to a downgrade of the U.S.'s triple-A credit
rating by Standard & Poor's, "we've been inviting our clients to simply expect
volatility, thinking you could see 100-point swings. But it's not there," Speiss
said in a telephone interview. The market has lately seen flat sessions but
generally remains on an upward trajectory, he noted.

The S&P 500 Index last week finished with its seventh consecutive week of gains,
the longest string of wins since January 2011, and hit its highest level since
October 2007. The Nasdaq Composite Index slipped 0.1% last week, but that's
coming after a six-week run of gains, and the Dow Jones Industrial Average last
week notched its best close since October 2007. See Michael Gayed's take on
sequestration and the market.
(http://www.marketwatch.com/News/Story/Story.aspx?guid={036AE8D2-861C-428F-9FB0-E641E26C7667}&siteId=mktw)

The Dow industrials, however, lost ground for a second week in a row. Read about
Friday's action in U.S. stocks.
(http://www.marketwatch.com/News/Story/Story.aspx?guid={141BAE86-777C-11E2-96E1-002128040CF6}&siteId=mktw)

Speiss cautioned that the market could start to see heavy swings if we're into
deep March and nothing has happened in Washington over a sequestration
resolution.

The sequestration issue for defense companies is very important, but it isn't a
catalyst for an overall equity-market correction, said Jim Paulsen, strategist at
Wells Capital Management. Wall Street has already pushed through Washington's
tussle over a key issue--taxes--this year, and investors have "stepped through"
worries about the U.S. economy faltering, a hard landing in the Chinese economy,
"the euro blowing apart and, of course, the fiscal cliff."

Now that investors have received data about continuing recovery in the U.S.
housing market and improvement in activity in China and other emerging markets,
"you've got the same fiscal [issue] going on," in Washington, but "the landscape
for investors has moved a lot over the last sixty to ninety days," he said.

Paulsen also said investors appear motivated to navigate through Washington's
latest crisis because they don't want to miss out on rallies. "All we've done for
four years is have one Armageddon after another," he said.

In both 2010 and 2011, there were "big selloff[s] in the stock market because of
Armageddon. People sold out, then watched it recover and go onto new highs," he
said. "It got a lot people in trouble investment-wise."

A fund-manager survey by Bank of America Merrill Lynch released last week showed
managers continue to see value in equities in the wake of gains so far this year,
and about 13% of those surveyed said equities are still undervalued.

Markets may be vulnerable to bad news, "but valuation support suggests any
correction should be short and shallow," said Michael Hartnett, chief investment
strategist at B. of A. Merrill Lynch Global Research. Read more about the view of
global fund managers in The Tell blog.
(http://blogs.marketwatch.com/thetell/2013/02/12/itll-be-a-short-and-shallow-stock-correction-if-any-say-fund-managers/)

Even if Washington "kicks the can down the road, which I think they will, they'll
come up with some half-answer and that's not enough to stop stocks going higher,"
said Adam Hewison, co-founder of financial analysis and information firm INO, who
said the market is bullish on a technical basis.

Stocks are finding support from the Federal Reserve's continued contribution of
liquidity, as well as from M&A activity, he said. Last week, AMR Corp. , parent
of American Airlines, and US Airways Group Inc. unveiled plans to merge, while
H.J. Heinz Co. agreed to be acquired by Warren Buffett's Berkshire Hathaway and
3G Capital for more than $23 billion.

Read more on Berkshire's Heinz deal.
(http://blogs.marketwatch.com/thetell/2013/02/14/heinz-opens-doors-to-emerging-markets-for-berkshire/)

"That's the first time we've seen deals that big being done in a long, long,
time," said Hewison. "It gets back to the perception that a lot of stocks are
undervalued and...a situation where you can do better in stocks than having your
money in the bank [on a] practically zero interest rate."

Hewison is targeting 1,550 to 1,600 in the S&P 500 in the first quarter.