Stocks Falling into Final Hour on Rising Financial Sector Pessimism, Profit-Taking, US Housing Worries

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Mixed
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 22.74 +.62%
  
• ISE Sentiment Index 153.0 +14.18%
  
• Total Put/Call .76 -23.23%
  
• NYSE Arms 1.03 +55.46%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 107.78 bps -2.48%
  
• European Financial Sector CDS Index 129.28 bps -3.83%
  
• Western Europe Sovereign Debt CDS Index 159.0 bps +.21%
  
• Emerging Market CDS Index 222.67 bps -.57%
  
• 2-Year Swap Spread 16.0 unch.
  
• TED Spread 13.0 -2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .15% +1 bp
  
• Yield Curve 206.0 +3 bps
  
• China Import Iron Ore Spot $140.80/Metric Tonne +.93%
  
• Citi US Economic Surprise Index -14.90 -3.2 points.
  
• 10-Year TIPS Spread 1.81% -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating -4 open in Japan
• DAX Futures: Indicating +19 open in Germany

Portfolio:

• Slightly Lower: On losses in my Retail, Biotech and Ag long positions
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades lower despite gains in commodities and most overseas markets. On the positive side, Computer, Oil Service, Alt Energy and Coal shares are especially strong, rising 1.0%+. Small-caps are outperforming. Copper is rising another +.63%. The 10-year yield is rising +3 bps to 2.49%. On the negative side, REIT, Retail, Homebuilding, Insurance, Biotech, Oil Tanker and Telecom shares are under pressure, falling more than .75%. (XLF)/(IYR)/(XHB) are a bit heavy. The US Muni CDS Index is jumping +3.46% to 220.71 bps. The euro currency continues to ignore mounting headwinds for the region as traders focus on deteriorating US fundamentals. The Shanghai Composite finished near session lows, falling slightly overnight, and closed below its 50-day moving average again. Investors continue to ignore most negative news items, which remains a large market positive. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, investor performance angst and technical buying.