North American Investment Grade CDS Index 85.30 +2.49%
European Financial Sector CDS Index 176.17 bps +12.17%
Western Europe Sovereign Debt CDS Index 204.17 bps +1.49%
Emerging Market CDS Index 202.79 +3.70%
2-Year Swap Spread 25.0 +4 bps
TED Spread 16.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .14% +1 bp
Yield Curve 274.0 -2 bps
China Import Iron Ore Spot $171.30/Metric Tonne +.18%
Citi US Economic Surprise Index +18.90 unch.
10-Year TIPS Spread 2.40% -1 bp
Overseas Futures:
Nikkei Futures: Indicating -15 open in Japan
DAX Futures: Indicating +10 open in Germany
Portfolio:
Higher: On gains in my Medical, Tech, Ag and Biotech long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades slightly lower despite some equity weakness overseas, some disappointing retail sales reports, recent stock gains and rising euro sovereign debt angst. On the positive side, Homebuilding, HMO, Computer Service, Networking, Semi, Disk Drive, Computer, Software, Ag, Oil Tanker and Defense shares are especially strong, rising more than 1.0%. The MS Tech Index is strongly outperforming, rising +.7%. The 10-year yield is falling -6 bps to 3.40%. The euro currency continues to trade poorly and gold is falling another -.42%. On the negative side, Retail, REIT, Bank, Telecom, Paper, Gold, Oil Service, Energy and Coal shares are under meaningful pressure, falling more than 1.0%. Copper is down -1.91%. The Greece sovereign cds is climbing +2.79% to 1,061.23 bps, the Portugal sovereign cds is gaining +2.81% to 511.99 bps, the Russia sovereign cds is rising +3.1% to 141.31 bps and the China sovereign cds is rising +4.2% to 70.07 bps. The Eurozone Investment Grade CDS Index is jumping +4.35% to 88.84 bps. The Euro Financial Sector CDS Index is soaring out of its recent trading range to the highest level since June 8th of last year and the Western Europe Sovereign CDS Index is still near a record high. Moreover, the US Muni CDS Index is rising +3.31% to 227.31 bps. The AAII % Bulls rose to 55.88 this week, while the % Bears fell to 18.25, which is also a negative. The technical action in shares of (TGT) is also a bit of a concern. The large rise in the euro financial sector credit default swap index should be monitored closely. I suspect it is very near a point in which equity investors will begin to take notice. As well, if the decline in the euro currency were to become disorderly an adverse equity reaction would be likely. While a strong jobs report tomorrow would be a positive over the intermediate-term, it is possible it would result in equity weakness if the 10-year yield and US dollar were to rise too much as a result. Moreover, a strong number is widely anticipated and investors are still overly bullish. A jobs report right around estimates or just slightly higher would be the best outcome for stock investors, in my opinion. One of my longs, (VRX), boosted guidance today, which sent the stock soaring +18% on volume to the highest level since Sept. 2003. While the stock is extended short-term, I still see further meaningful upside in the shares from current levels over the intermediate-term. I expect US stocks to trade mixed-to-lower into the close from current levels on rising euro sovereign debt angst, retail sector concerns, increasing financial sector pessimism, more shorting and profit-taking.
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