Stocks Slightly Higher into Final Hour on Less Financial Sector Pessimism, Tax Policy/Election Optimism, Earnings Optimism, Less Economic Fear

Broad Market Tone:

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

Equity Investor Angst:

• VIX 18.26 -1.40%
  
• ISE Sentiment Index 176.0 +40.63%
  
• Total Put/Call .69 -6.76%
  
• NYSE Arms .64 +18.35%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 85.27 bps -3.32%
  
• European Financial Sector CDS Index 102.33 bps +5.77%
  
• Western Europe Sovereign Debt CDS Index 165.66 bps +1.84%
  
• Emerging Market CDS Index 190.0 bps +1.37%
  
• 2-Year Swap Spread 15.0 unch.
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .12% +1 bp
  
• Yield Curve 217.0 +1 bp
  
• China Import Iron Ore Spot $153.20/Metric Tonne unch.
  
• Citi US Economic Surprise Index +26.0 +13.2 points
  
• 10-Year TIPS Spread 2.10% +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +65 open in Japan
• DAX Futures: Indicating +11 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades consolidates recent gains despite fears over a possible "sell the news" reaction to the election/Fed announcement and euro sovereign debt concerns. On the positive side, Education, Construction, I-Banking, Bank, Disk Drive and Coal shares are especially strong, rising 1.0%+. (XLF)/(IYR) have been relatively strong throughout the day. Cyclicals are strongly outperforming. Copper is rising another +1.05%. The North American Investment Grade CDS Index is continuing its recent downtrend, which is a large positive. The 10-year yield is rising +5 bps to 2.54%. The ECRI Weekly Leading Economic Index rose to 123.90 this week from 123.20 the prior week and is now at the best level since the week of May 21. Moreover, the Citi US Economic Surprise Index is now at the best level since May 26th. The correlation between S&P 500 stocks and the index has plunged -16.32% over the last 5 days to 51.69%, which is the lowest level since Bloomberg data began in November 2008. On the negative side, Biotech, Software and Oil Tanker shares are under pressure, falling more than 1.0%. The Spain sovereign cds is gaining +5.36% to 247.95 bps and the Greece sovereign cds is gaining +3.24% to 888.06 bps. The Western Europe Sovereign CDS Index is now near its record high set May 7th at 174.12 bps, which is a large negative. This is likely beginning to pressure the euro currency. US stocks will likely further consolidate recent gains over the near-term, however I am starting to keep a very close eye on European debt issues once again. I expect US stocks to trade mixed-to-higher into the close from current levels on tax policy/election optimism, less economic fear, buyout speculation, investment manager performance angst, diminishing financial sector pessimism, short-covering and earnings optimism.