Stocks Lower into Final Hour on Rising Economic Fear, Profit-Taking, Increasing Financial Sector Pessimism

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 22.57 +2.13%
  
• ISE Sentiment Index 97.0 -38.22%
  
• Total Put/Call .95 +1.06%
  
• NYSE Arms 1.69 +64.21%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 103.85 bps +2.04%
  
• European Financial Sector CDS Index 101.33 bps +2.30%
  
• Western Europe Sovereign Debt CDS Index 120.0 bps +3.26%
  
• Emerging Market CDS Index 211.36 bps +.47%
  
• 2-Year Swap Spread 20.0 +2 bps
  
• TED Spread 27.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .14% unch.
  
• Yield Curve 231.0 -6 bps
  
• China Import Iron Ore Spot $144.50/Metric Tonne +.63%
  
• Citi US Economic Surprise Index -32.90 -1.3 points
  
• 10-Year TIPS Spread 1.78% -5 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -112 open in Japan
• DAX Futures: Indicating +40 open in Germany

Portfolio:

• Slightly Lower: On losses in my Retail and Technology long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 is cutting losses substantially into the afternoon, despite more weak economic data and recent stock gains. On the positive side, Airline, Restaurant, HMO, Biotech, Wireless, Gold, Ag and Coal stocks are higher on the day. Copper is flat despite today's headwinds. On the negative side, Education, Hospital, Computer Service, Disk Drive, Computer Hardware and Road&Rail shares are under pressure, falling 1.5%+. Small-caps are underperforming. (XLF) has also underperformed throughout the day. The US Muni CDS Index is rising +3.37% to 208.44 bps. Today's July jobs report wasn't that far from expectations, however the downward revisions to June were meaningful. The euro will likely make another meaningful top over the coming weeks. Unless worries over China's economy increase, I still expect US stocks to work higher near-term on slowing, but not negative, US economic growth and surging profits. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, technical buying, mostly positive earnings reports and bargain-hunting.