Friday, November 12, 2010

Stocks Falling into Final Hour on China Hard-Landing Fears, Eurozone Debt Worries, Rising Long-Term Rates, Profit-Taking


Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Every Sector Declining
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 20.56 +10.30%
  • ISE Sentiment Index 91.0 -29.46%
  • Total Put/Call .81 +6.58%
  • NYSE Arms 1.70 +88.50%
Credit Investor Angst:
  • North American Investment Grade CDS Index 92.50 bps +2.36%
  • European Financial Sector CDS Index 113.21 bps -2.41%
  • Western Europe Sovereign Debt CDS Index 170.33 bps -2.29%
  • Emerging Market CDS Index 204.18 bps +3.62%
  • 2-Year Swap Spread 22.0 -8 bps
  • TED Spread 16.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .12% unch.
  • Yield Curve 226.0 +4 bps
  • China Import Iron Ore Spot $161.80/Metric Tonne +.50%
  • Citi US Economic Surprise Index +36.0 +.1 point
  • 10-Year TIPS Spread 2.08% +6 bps
Overseas Futures:
  • Nikkei Futures: Indicating +35 open in Japan
  • DAX Futures: Indicating -9 open in Germany
Portfolio:
  • Lower: On losses in my Tech, Ag, Biotech and Medical long positions
  • Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short and took some profits in an Ag long
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades meaningfully lower despite a bounce in the euro, a decline in sovereign debt angst and a better US Consumer Confidence reading. On the positive side, Semi, Airline and Networking shares are holding up well. The Spain sovereign cds is declining -3.9%, the Portugal sovereign cds is down -6.1% and the Ireland sovereign cds is down -7.45%. On the negative side, Coal, Alt Energy, Oil Service, Ag, Gold, Paper, Homebuilding and Gaming shares are under significant pressure, falling more than 2.50%. (XLF) has undperformed slightly. Small-cap and cyclical shares are underperforming, as well. Shanghai copper inventories are slightly higher again today. Copper is falling -3.51% and the S&P GSCI Ag Spot Index is plunging -5.74%. The China sovereign cds is jumping +5.3% and the Japan sovereign cds is gaining +4.5%. The Illinois and California municipal cds are up +3.04% and +3.0%, respectively. I suspect global equity investors are finally beginning to come to grips with some of the many negative consequences of the Fed's QE2 program. One such negative consequence is that the more quantitative easing the Fed does, the greater the odds of a hard-landing in China become as they hike rates to curtail their budding inflation problem. Moreover, long-term US interest rates are moving up too much as inflation expectations rise, which is defeating some of the main purpose of QE2. I expect US stocks to trade mixed-to-lower into the close from current levels on China hard-landing worries, more shorting, profit-taking, Eurozone debt worries and rising long-term rates.

3 comments:

Anonymous said...

http://www.cnbc.com/id/40157859

Anonymous said...

http://www.theonion.com/video/oprah-invites-hundreds-of-lucky-fans-to-be-buried,18443/

Anonymous said...

http://www.cnn.com/2010/TRAVEL/11/12/travel.screening/index.html?hpt=T1