Monday, March 07, 2011

Stocks Lower into Final Hour on Rising Energy Prices, Growing Mideast Unrest, Emerging Markets Inflation Fears, More Shorting


Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Slightly Above Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 21.15 +10.97%
  • ISE Sentiment Index 136.0 -12.83%
  • Total Put/Call .90 +16.88%
  • NYSE Arms 1.48 -10.53%
Credit Investor Angst:
  • North American Investment Grade CDS Index 84.51 +1.22%
  • European Financial Sector CDS Index 117.50 +.91%
  • Western Europe Sovereign Debt CDS Index 175.17 bps +1.15%
  • Emerging Market CDS Index 208.63 -2.12%
  • 2-Year Swap Spread 20.0 -1 bp
  • TED Spread 21.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .10% -1 bp
  • Yield Curve 281.0 unch.
  • China Import Iron Ore Spot $172.80/Metric Tonne -2.15%
  • Citi US Economic Surprise Index +93.20 -4.3 points
  • 10-Year TIPS Spread 2.53% +4 bps
Overseas Futures:
  • Nikkei Futures: Indicating -50 open in Japan
  • DAX Futures: Indicating -2 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Retail, Tech and Medical longs
  • Disclosed Trades: Added to my (IWM)/(QQQQ) hedges and then covered some of them
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades lower, despite a pullback in oil from session highs, stable long-term rates and buyout speculation. On the positive side, Computer, Disk Drive, Utility and Restaurant shares are higher on the day. The Saudi sovereign cds is falling -2.81% to 129.34 bps. The UBS-Bloomberg Ag Spot Index is down -.4%. On the negative side, Gaming, Construction, Networking, Semi, Ag, Alt Energy and Coal shares are under significant pressure, falling more than 1.75% on the day. Cyclicals and small-caps are underperforming. The Portugal sovereign cds is rising another +1.59% to 490.17 bps, the Egypt sovereign cds is gaining +2.42% to 374.72 bps and the Greece sovereign cds is gaining another +5.04% to 1,037.50 bps. The Greece sovereign cds is very close to its record high set on 12/31/10 at 1,074.08 bps. The Citi Eurozone Economic Surprise Index is falling to +5.1 today, which is the lowest level since April 15th, 2010. The avg. US price for a gallon of gas is up another .04/gallon today to $3.51/gallon. It is now up .39/gallon in 18 days. The US dollar continues to trade poorly, notwithstanding today's small bounce. Oil is rising another +.4%, copper is falling -3.02% and gold is rising +.44%. China Iron Ore Spot is down -10.0% in 2 weeks. The stock bears are winning today, but have been unable to gain meaningful downside traction. Equity investor complacency regarding the deteriorating situation in the Mideast and the eventual negative effects of soaring commodities remains high. Oil will likely continue to grind higher until the situation in Saudi calms. It is hard to see this happening before next Friday's "day of rage". However, speculation by funds in oil is at very extreme levels and likely caps significant near-term upside in the commodity barring any new developments in the region. I continue to believe any significant reversal lower in oil to below $100/bbl would lead to new 52-week highs in stocks. I expect US stocks to trade mixed-to-lower into the close from current levels on rising energy prices, growing Mideast unrest, emerging market inflation fears, eurozone debt angst, more shorting and technical selling.

1 comment:

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