Stocks Soaring into Final Hour on Falling Energy Prices, More Economic Optimism, Short-Covering, Fund Inflows

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.26 -11.69%
  
• ISE Sentiment Index 126.0 +18.87%
  
• Total Put/Call .85 unch.
  
• NYSE Arms .68 -36.61%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 82.77 -1.16%
  
• European Financial Sector CDS Index 111.17 -4.86%
  
• Western Europe Sovereign Debt CDS Index 172.83 bps unch.
  
• Emerging Market CDS Index 212.64 -4.16%
  
• 2-Year Swap Spread 20.0 unch.
  
• TED Spread 19.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .12% unch.
  
• Yield Curve 279.0 unch.
  
• China Import Iron Ore Spot $177.90/Metric Tonne -.06%
  
• Citi US Economic Surprise Index +86.10 +2.5 points
  
• 10-Year TIPS Spread 2.50% +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +139 open in Japan
• DAX Futures: Indicating +51 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades near session highs, despite just a small drop in oil, Mideast unrest, higher long-term rates and emerging markets inflation fears. On the positive side, Airline, Road & Rail, Restaurant, Construction, HMO, Medical, Wireless, Computer Service, Networking, Semi, Steel, Coal and Defense shares are especially strong, rising more than 2.0%. Small-cap and Cyclical shares are outperforming again. (XLF) has traded well throughout the day. The US Muni CDS Index is declining -4.36% to 153.06 bps. The Russia sovereign cds is dropping -6.68% to 127.69 bps and the Belgium sovereign cds is falling 4.28% to 162.0 bps. Moreover, the Saudi sovereign cds is falling -5.68% to 134.24 bps despite reports of more protests in the kingdom. Oil is falling -.47% and gold is -1.58% lower on the day. Lumber is gaining +3.28%. On the negative side, Telecom shares are lower on the day. Retail is also underperforming. The 10-year yield is rising +10 bps to 3.57%. The Portugal sovereign cds is rising +1.5% to 469.66 bps. The avg. US price for a gallon of gas is up another .04/gallon today to $3.43/gallon. It is now up .31/gallon in 16 days. The US dollar is trading very poorly again today given the data and recent euro gains in anticipation of hawkish ECB commentary. Investor complacency regarding the deteriorating situation in the Mideast and the eventual negative effects of soaring commodities remains high. Oil is just barely down today despite positive developments in Libya and Saudi's "day of rage" is looming next week. The equity market remains extraordinarily resilient. I still believe this is a result of investors' anticipating a likely better-than-expected February jobs report on Fri. Stocks will likely build on today's gains tomorrow unless oil or rates start moving up too much. I expect US stocks to trade mixed-to-higher into the close from current levels on more economic optimism, lower energy prices, short-covering, technical buying and fund inflows.