North American Investment Grade CDS Index 104.96 bps -1.80%
European Financial Sector CDS Index 119.72 bps -5.24%
Western Europe Sovereign Debt CDS Index 154.17 bps -1.18%
Emerging Market CDS Index 220.43 bps -2.93%
2-Year Swap Spread 20.0 +2 bps
TED Spread 14.0 unch.
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 210.0 +2 bps
China Import Iron Ore Spot $141.10/Metric Tonne unch.
Citi US Economic Surprise Index -6.40 +1.5 points.
10-Year TIPS Spread 1.82% +1 bp
Overseas Futures:
Nikkei Futures: Indicating +36 open in Japan
DAX Futures: Indicating +17 open in Germany
Portfolio:
Slightly Higher: On gains in my Biotech and Medical 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 at the upper end of its recent trading range despite being technically overbought and mixed economic data. On the positive side, Education, I-Banking, Bank, Disk Drive, Steel, Coal and Energy shares are especially strong, rising 1.25%+. The Ireland sovereign cds is dropping -2.69% to 445.31 bps. Moreover, the decline in the euro financial sector cds index is also a large positive. Copper is rising another +.99%. The ongoing weakness in the US dollar, which is extremely negative for US equities longer-term, is a short-term positive. On the negative side, Road & Rail, HMO, Oil Tanker and Tobacco shares are under pressure, falling more than .75%. The S&P GSCI Ag Spot Index, which led the recent stock rally, is declining another -.64% today. Lumber is falling -2.07% and China Stainless Steel spot prices are down -3.94% this week. The Illinois Muni Credit Default Swap is jumping +9.8% today to 286 bps and the California Muni CDS is rising +7.88% to 281 bps. Despite better economic data of late and recent declines, the 10-year yield is flat on the day at 2.52%. I still do not think that QE2 is a foregone conclusion even as the euro soars ahead of a US election that will will likely be US dollar positive. Moreover, I do not believe QE2 will have much of a positive impact on the economy, while further imperiling the long-term fiscal health of the country. Much of the leadership today is in the worst-performing stocks YTD and many market leaders are under mild pressure. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, profit-taking and China worries.
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