Stocks Lower into Final Hour on Economic Worries, Rising Credit Market Angst

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs and Computer longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is about average. Investor anxiety is high again. Today’s overall market action is bearish. The VIX is rising 2.1% today to a high 27.1. The ISE Sentiment Index hit a depressed 48.0 and the total put/call hit a high 1.54 today. Finally, the NYSE Arms has been running above average most of the day. The severe declines in a number of market-leading stocks are a bad sign. The TED spread is rising another 10 basis points today to 1.32, the highest since January 22 and up from .78 on February 14^th. The three-month t-bill yield is down to 1.69%, the lowest since September 2004. The odds for a 75 basis point rate cut at the upcoming Fed meeting have risen to 74.0%. I also think the odds that a cut occurs before the scheduled meeting have risen substantially of late. On the positive side, retail, REIT, biotech, road&rail, drug, medical equipment, telecom, computer service, steel, energy, utility and defense shares are higher or flat on the day. Nikkei futures indicate an +148 open in Japan and DAX futures indicate an +4 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as rising rate cut speculation and bargain-hunting offsets economic worries and increasing credit market angst.