Stocks Slightly Lower into Final Hour on Rising Euro Debt Fears, Korean Peninsula Worries, Iran Concerns

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 22.06 -.72%
  
• ISE Sentiment Index 73.0 -42.06%
  
• Total Put/Call 1.05 +23.53%
  
• NYSE Arms .79 -60.51%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 98.01 bps +2.49%
  
• European Financial Sector CDS Index 146.09 bps +8.56%
  
• Western Europe Sovereign Debt CDS Index 190.66 bps +5.73%
  
• Emerging Market CDS Index 234.99 bps +4.24%
  
• 2-Year Swap Spread 26.0 unch.
  
• TED Spread 14.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 233.0 -3 bps
  
• China Import Iron Ore Spot $166.70/Metric Tonne +.12%
  
• Citi US Economic Surprise Index +19.40 -4.7 points
  
• 10-Year TIPS Spread 2.13% -1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating -46 open in Japan
• DAX Futures: Indicating +53 open in Germany

Portfolio:

• Slightly Higher: On gains in my Medical, Biotech and Technology long positions
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades at session highs, reversing meaningful morning losses, despite rising Korean Peninsula tensions and increasing euro sovereign debt angst. On the positive side, Coal, Energy, Oil Service, Bank, Hospital, HMO, Construction, Education and Road & Rail shares are especially strong, rising more than .5%. Small-cap and cyclical shares are outperforming. (XLF) has traded very well throughout the day. The 10-year yield is falling -4 bps to 2.83%. The euro currency continues to trade very poorly. Copper is rising +.3% and the S&P GSCI Ag Spot Index is rising +.46% despite euro weakness. On the negative side, Airline, Wireless, Ag, Networking, Telecom and Drug shares are under pressure, falling more than 1.0%. The Russia sovereign cds is rising +5.76% to 172.11 bps, the Hungary sovereign cds is gaining +5.03% to 362.87 bps, the Portugal sovereign cds is surging +6.54% to 538.77 bps, the Spain sovereign cds is climbing +8.27% to 350.46 bps and the UK sovereign cds is rising +11.31% to 78.32 bps. Moreover, the Emerging Markets Sovereign CDS Index is surging +8.75% to 216.22 bps and other key cds indices continue their recent sharp moves higher. While the euro financial sector cds index has soared of late, it is still below levels seen during May/June. The Citi Asia Economic Surprise Index continues to weaken, falling -1 point to -7.9 today, which is the lowest reading globally and the lowest since May 2009. Given the ongoing jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals, rising Korean peninsula tensions and financial sector Basel III concerns, the broad market continues to remain resilient, which is a big positive. Market leaders remain relatively firm. Spain's debt auction on Thursday May be the market's next big test. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, diminishing economic fear, seasonal strength, less financial sector pessimism and short-covering.