Stocks Lower into Final Hour on Rising Sovereign Debt Angst, Increasing Economic Fear, Technical Selling

Broad Market Tone:

• Advance/Decline Line: About Even
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 25.60 -3.18%
  
• ISE Sentiment Index 76.0 +5.56%
  
• Total Put/Call 1.01 +3.06%
  
• NYSE Arms 1.55 -42.54%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 109.95 bps +2.20%
  
• European Financial Sector CDS Index 121.54 bps +7.82%
  
• Western Europe Sovereign Debt CDS Index 143.35 bps +4.84%
  
• Emerging Market CDS Index 234.60 bps +.92%
  
• 2-Year Swap Spread 18.0 unch.
  
• TED Spread 18.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 212.0 +2 bps
  
• China Import Iron Ore Spot $147.50/Metric Tonne +.34%
  
• Citi US Economic Surprise Index -59.0 unch.
  
• 10-Year TIPS Spread 1.60% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating -24 open in Japan
• DAX Futures: Indicating +14 open in Germany

Portfolio:

• Slightly Higher: On gains in my Retail and Tech long positions
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 is trading well off its lows despite a sharp euro decline, rising cds and weakness in overseas stocks. On the positive side, Utility, Internet, Software, Disk Drive, Networking and I-Banking stocks are especially strong, rising .5%+. Tech shares have outperformed throughout the day again, with the MS Tech Index rising +1.0%. The Libor-OIS and TED spreads continue to trend lower. The 10-year yield is rising +4 bps to 2.61%. The S&P GSCI Ag Spot Index is rising another +.58%. Oil continues to trade poorly. Another downleg lower in the commodity is likely over the coming weeks. On the negative side, Education, Medical Equipment, Telecom, Coal, Alt Energy, Oil Tanker, Energy, Oil Service, Gold and Steel shares are especially weak, falling more than 1.0%. Cyclicals are underperforming. The European Investment Grade CDS Index is rising +3.11% to 105.66 bps. The Spain sovereign CDS Index is rising +5.0% to 227.2 bps, the Greece sovereign cds is gaining +3.2% to 896.67 bps and the Ireland sovereign cds is rising +4.79% to 297.45 bps. The major averages remain somewhat resilient given the news over the last few days. The recent outpeformance by the tech sector is also a positive for the broad market. However, the recent surge in key credit default swap indices is troublesome. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting and buyout speculation.