Stocks Slightly Lower into Final Hour on Rising Sovereign Debt Angst, Profit-Taking, Real Estate Worries

Broad Market Tone:

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

Equity Investor Angst:

• VIX 22.19 +2.21%
  
• ISE Sentiment Index 120.0 -16.67%
  
• Total Put/Call .82 unch.
  
• NYSE Arms .77 +48.14%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 108.50 bps -1.03%
  
• European Financial Sector CDS Index 130.78 bps +1.57%
  
• Western Europe Sovereign Debt CDS Index 156.0 bps +.38%
  
• Emerging Market CDS Index 222.46 bps -3.57%
  
• 2-Year Swap Spread 18.0 -1 bp
  
• TED Spread 16.0 +2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .13% -2 bps
  
• Yield Curve 209.0 -7 bps
  
• China Import Iron Ore Spot $139.50/Metric Tonne unch.
  
• Citi US Economic Surprise Index -7.10 +1.6 points.
  
• 10-Year TIPS Spread 1.78% -6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -33 open in Japan
• DAX Futures: Indicating +29 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades just slightly lower despite recent sharp equity gains, rising real estate sector pessimism, sovereign debt worries and more weak economic data. On the positive side, Airline, Gaming, Telecom, Networking, Steel and Oil Tanker shares are especially strong, rising 1.0%+. Select large-cap growth stock leaders continue to trade much better than the broad market. The S&P GSCI Ag Spot Index is rising another +.67%. On the negative side, Education, REIT, Biotech and Disk Drive shares are under pressure, falling more than 1.0%. (IYR) has been a bit heavy throughout the day again. Lumber is falling -1.41%. The Euro Financial Sector CDS Index is up again today and is very near a technical breakout, which is a major negative. The Portugal sovereign cds is rising +3.10% to 414.14 bps and is close to a new record high. The Ireland sovereign cds is continuing its recent parabolic move higher, rising another +2.01% to a record of 475.87 bps and the Greece sovereign cds is gaining +2.16% to 836.92 bps. Furthermore, key credit default swap indices continue to move higher, even as equities trend higher, which is also a large negative. I suspect equity investors will continue to ignore these moves until they start to negatively impact the euro currency. Oil continues to trade poorly given recent equity and euro strength. The 10-year yield is down another -9 bps to 2.51% and is close to its 52-week low at 2.41%. The Shanghai Composite closed slightly above its 50-day moving average last night, but remains a global laggard. Consumer confidence for September, which is released tomorrow, should exceed estimates. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, technical buying, growth stock optimism and buyout speculation.