Stocks Lower into Final Hour on Rising Euro Sovereign Debt Angst, Profit-Taking, More Shorting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 21.91 +3.35%
  
• ISE Sentiment Index 77.0 -47.62%
  
• Total Put/Call .88 +1.15%
  
• NYSE Arms 1.33 +12.27%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 93.68 bps -.36%
  
• European Financial Sector CDS Index 95.83 bps +2.17%
  
• Western Europe Sovereign Debt CDS Index 153.33 bps +3.60%
  
• Emerging Market CDS Index 204.36 bps -.03%
  
• 2-Year Swap Spread 16.0 unch.
  
• TED Spread 18.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .10% -1 bp
  
• Yield Curve 228.0 +1 bp
  
• China Import Iron Ore Spot $149.90/Metric Tonne +.54%
  
• Citi US Economic Surprise Index +9.10 +7.4 points
  
• 10-Year TIPS Spread 2.19% +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -55 open in Japan
• DAX Futures: Indicating -27 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech, Biotech and Ag long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades near session lows despite mostly positive economic data. On the positive side, Education, Road & Rail, REIT, Computer Hardware, Coal and Oil Tanker shares are especially strong, rising .5%+. (IYR) has traded well throughout the day. Copper is rising +1.04% and Lumber is rising +1.86%. On the negative side, Airline, Hospital, Biotech, I-Banking, Bank, Semi, Alt Energy and Utility shares are under pressure, falling more than 1.0%. Cyclicals and small-caps are underperforming. The Portugal sovereign cds is gaining +3.08% to 389.72 bps, the Greece sovereign cds is rising +6.57% to 857.77 bps, the Ireland sovereign cds is gaining +5.03% to 495.38 bps and the Spain sovereign cds is gaining +4.71% to 225.57 bps. Moreover, the California Municipal Credit Default Swap is soaring +10.17% to 268 bps, which is just 3 bps below the Illinois cds. Despite today's reversal lower, the broad market continues to consolidate recent gains on below average volume, which is healthy. I continue to believe that with so many investors positioning for a "sell the news" reaction to this week's Fed meeting and US election that any expected weakness may be relatively mild and short-term in nature. I expect US stocks to trade modestly higher into the close from current levels on tax policy/election optimism, less economic fear, buyout speculation and earnings optimism.