Stocks Lower into Final Hour on Higher Energy Prices, Weakness in Financials

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Biotech longs and Networking longs. I added to my (EEM) short and added to my (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 50% net long. The overall tone of the market is slightly positive today as the advance/decline line is about even, most sectors are rising and volume is about average. Investor anxiety is above average. Today’s overall market action is bearish. The US dollar-based 3-month LIBOR rate is falling another 5 basis points to 5.06% today and is down 67 basis points from September highs. The average 30-year jumbo mortgage rate is falling 11 basis points today to 6.72% and is down 61 basis points from September highs. As well, the 30-day asset backed commercial paper yield is falling 15 basis points today to 6.01%, down 32 basis points from September highs. The substantial rise in oil today is a big negative. Despite a firmer dollar, decelerating global demand and rising supply oil continues to rise. According to the Energy Intelligence Group, global oil production is now 86.9 million barrels per day and global demand is 85.2 million barrels per day. Oil bulls have said for several years that global production was capped at 85 million barrels per day. The decline in financial shares is also a big negative today, given the news. I suspect today’s reversal in stocks will lead to losses in Asia tonight. I expect US stocks to trade mixed-to-lower into the close from current levels on rising energy prices and profit-taking.