Friday, February 04, 2011

Stocks Rising into Final Hour on Falling Energy Prices, Technical Buying, Fund Inflows, Earnings Optimism

Broad Market Tone:

  • Advance/Decline Line: About Even
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 16.21 -2.88%
  • ISE Sentiment Index 143.0 +8.33%
  • Total Put/Call .87 unch.
  • NYSE Arms 1.13 +46.58%
Credit Investor Angst:
  • North American Investment Grade CDS Index 81.99 -1.23%
  • European Financial Sector CDS Index 125.83 bps -3.42%
  • Western Europe Sovereign Debt CDS Index 161.83 bps +.62%
  • Emerging Market CDS Index 211.16 -.05%
  • 2-Year Swap Spread 21.0 unch.
  • TED Spread 17.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .14% unch.
  • Yield Curve 288.0 +4 bps
  • China Import Iron Ore Spot $185.60/Metric Tonne unch.
  • Citi US Economic Surprise Index +64.10 +17.3 points
  • 10-Year TIPS Spread 2.36% +3 bps
Overseas Futures:
  • Nikkei Futures: Indicating +83 open in Japan
  • DAX Futures: Indicating +9 open in Germany
  • Higher: On gains in my Medical, Retail and Tech 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 slightly higher, despite recent equity gains, rising Mideast tensions, emerging markets inflation worries, a somewhat disappointing jobs report and rising long-term rates. On the positive side, Wireless, Networking, Disk Drive, Semi and Internet shares are especially strong, rising more than 1.0%. Small/Mid-Cap growth stocks are strongly outperforming today. Copper is rising +.84%, lumber is gaining +.63%, gold is down -.55% and oil is falling -1.94%. The Japan sovereign cds is falling -3.29% to 76.62 bps, the Spain sovereign cds is falling -2.13% to 222.45 bps and the Hungary sovereign cds is declining -2.25% to 281.84 bps. The US Muni CDS Index is declining -2.94% to 184.07 bps. Moreover, the European Financial Sector CDS Index continues to trend meaningfully lower, which is also a major positive. The Citi US Economic Surprise Index is hitting the highest level since Sept. 3, 2009. On the negative side, Homebuilding, Education, Gaming, Steel, Oil Service and Coal shares are under pressure, falling more than 1.0%. (XLF) is underperforming again. (IYR) is also relatively weak. The UBS-Bloomberg Spot Ag Index is gaining +.38%. The 10-Year yield is rising +9 bps to 3.64%. The Saudi sovereign cds is gaining +5.27% to 127.50 bps and the Portugal sovereign cds is rising +1.7% to 405.08 bps. The Homebuilders are now down about -8.7% in two weeks with the S&P 500 at a multi-year high. Brazil and India equities trade very poorly. The major US averages continue to trade very well as they slowly build on their recent technical breakouts. I still believe any subsiding in Mideast tensions would likely lead to another meaningful push higher in US stocks. I expect US stocks to trade modestly higher into the close from current levels on earnings optimism, technical buying, US fund inflows, buyout speculation, short-covering, falling energy prices and rising economic optimism.

No comments: