MORNING TIDBITS

S&P 500 Slips Below 200-Day Average in Bearish Signal.
The decline in U.S. stocks pushed the Standard & Poor’s 500 Index below its average closing price during the previous 200 days, a sign to some analysts that more losses are in store. While the benchmark gauge for U.S. equities traded below its 200-day moving average on May 6 and May 7, it hasn’t closed below the trendline since July 2009, four months into the rally that lifted the index as much as 80 percent from a 12-year low. To technical analysts, who base investment decisions on price and volume charts, a close below the 200-day moving average may signal a lasting retreat.

Pro-Growth Collapse Pounds Markets.
Unwinding of Risky, Highly Leveraged Investments Sends Dow Down 376.36; Oil, Dollar Join Plunge. The dramatic unwinding of a highly leveraged trading strategy embraced by hedge funds contributed to the global market selloff on Thursday. The strategy, known as the pro-growth trade, was based on a view that global economies would recover strongly and included bets that commodities, high-yielding currencies and stocks would keep rising, while safer investments such as Treasurys would fall. The Greek debt crisis and efforts by governments in Asia and Australia to rein in growth have undone the trade in recent weeks and the big moves in the currencies and commodities on Thursday were likely driven by investors selling their holdings to limit their losses. "The markets are telling you the growth trade is over," says Michael Novogratz, who oversees macro hedge funds at Fortress Investment Group. In recent days, he says, Fortress has unwound many of its positions that reflected its "pro-growth" mindset, including investments in Asian currencies. The pro-growth trade began to gain popularity about a year ago, when the banking crisis was thought to have passed. Investors, in particular big macro hedge funds that make bets based on their broad economic views, grew convinced that global growth led by China, India and Korea would pick up steam. When the trade worked, other funds jumped on the bandwagon. Among the major hedge funds thought to have been big players in at least one or more of the pro-growth bets include Paulson & Co., Moore Capital Management and Fortress. Wall Street, in particular Goldman Sachs(GS), provided investment ideas to hedge funds to play the trade. "There was a widespread view among hedge funds that the place to be was long global growth," says David Kostin, who follows hedge funds for Goldman Sachs Group Inc. With the markets going against them and losses mounting, hedge funds bailed out of their holdings on Thursday, helping to explain the sharp slide in U.S. stocks, crude oil, copper, the Australian dollar and other currencies, traders and analysts say. The pro-growth trade has been called into question in recent weeks following a growing list of "anti-growth" developments including attempts by China to tap the brakes on its booming growth, mounting sovereign-debt worries, concerns about the U.S. consumer as some measures of retail sales have faltered, disappointing jobless claims, looming financial reform and a short-selling ban in Germany.

Prime Brokers Expect More Margin Calls. Executives of several major prime brokerages said they expect there will be more margin calls Thursday than normal, but demands for managers to post cash as a result of losses weren't reaching crisis levels and the calls are expected to be met.