Wednesday, June 23, 2010

Stocks Slightly Lower into Final Hour on Rising Sovereign Debt Agnst, US Economic Fear, Increasing Financial Sector Pessimism

Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 27.44 +1.44%
  • ISE Sentiment Index 101.0 unch.
  • Total Put/Call 1.0 -2.91%
  • NYSE Arms 1.43 -58.98%
Credit Investor Angst:
  • North American Investment Grade CDS Index 116.56 bps +6.22%
  • European Financial Sector CDS Index 151.84 bps +12.04%
  • Western Europe Sovereign Debt CDS Index 124.83 bps -4.71%
  • Emerging Market CDS Index 254.07 bps +.77%
  • 2-Year Swap Spread 35.0 unch.
  • TED Spread 42.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .12% +1 bp
  • Yield Curve 243.0 -6 bps
  • China Import Iron Ore Spot $143.20/Metric Tonne -.42%
  • Citi US Economic Surprise Index -20.60 -5.7 points
  • 10-Year TIPS Spread 1.97% -4 bps
Overseas Futures:
  • Nikkei Futures: Indicating -43 open in Japan
  • DAX Futures: Indicating +12 open in Germany
  • Slightly Lower: On losses in my Technology, Retail and Medical long positions
  • Disclosed Trades: Covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades slightly lower despite many negatives. On the positive side, Coal, Steel and Homebuilding stocks are especially strong, rising .75%+. The reversal higher in the homebuilders, despite very bad data, is noteworthy. The bounce in the euro, mainly as a result of poor US economic data, is also helping prop up stocks today. On the negative side, Medical, I-Banking, Bank, Software, Energy and Utility shares are especially weak, falling .75%+. It remains a huge negative that Greece sovereign debt angst continues to rise despite Europe's recent actions. The Greece sovereign cds is rising another +8.23% to 947.53 bps, which is very near its record high of 1,031 on May 7th. Moreover, the Portugal sovereign cds is rising +6.23% to 319.51 bps and the Russia sovereign cds is surging +4.7% to 186.83 bps. The Emerging Markets Sovereign CDS Index is rising 9.7% to 239.33 bps. Finally, the European Investment Grade CDS Index is rising +7.07% to 120.50 bps. The 10-year yield is falling too much again, dropping another 6 bps to session lows. I am very surprised at today's equity resilience given the news. The deterioration in Greece, once again, is a huge negative that is currently being mostly ignored by investors as the euro currency bounces on poor US economic data. The market is unlikely to ignore Europe much longer, but the bears seem low on firepower right here and more short-covering could occur in the short-term. I expect US stocks to trade modestly lower into the close from current levels on technical selling, rising US housing worries, increasing sovereign debt angst, tax hike worries, increasing financial sector pessimism and more shorting.


Anonymous said...

Gary said...