Stocks Falling into Final Hour on Emerging Markets Inflation Fears, Growth Growth Worries, Profit-Taking, More Shorting

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 17.27 +8.01%
  
• ISE Sentiment Index 101.0 -7.34%
  
• Total Put/Call .91 +8.33%
  
• NYSE Arms .81 -28.30%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 88.77 +1.37%
  
• European Financial Sector CDS Index 85.67 +.97%
  
• Western Europe Sovereign Debt CDS Index 188.37 +.65%
  
• Emerging Market CDS Index 200.91 +1.38%
  
• 2-Year Swap Spread 18.0 +1 bp
  
• TED Spread 25.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .02% -1 bp
  
• Yield Curve 265.0 -2 bps
  
• China Import Iron Ore Spot $182.60/Metric Tonne +.76%
  
• Citi US Economic Surprise Index -6.70 -2.5 points
  
• 10-Year TIPS Spread 2.55% -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating -104 open in Japan
• DAX Futures: Indicating -18 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech and Biotech sector longs
  
• Disclosed Trades: Added (IWM)/(QQQ) hedges, added to my (EEM) short, added a commodity short, then covered some of my (IWM)/(QQQ) hedges
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades lower, despite lower energy prices, mostly positive earnings reports, buyout speculation and lower long-term rates. On the positive side, Telecom, Utility, Bank and Education shares are higher on the day. Copper is rising +1.0% and oil is falling -1.9%. Weekly retail sales rose +5.1% versus a +5.0% gain the prior week. On the negative side, Coal, Alt Energy, Energy, Oil Service, Ag, Paper and Hospital shares are under significant pressure, falling more than -2.0%. Small-caps and cyclicals are underperforming. Commodity-related equities have traded very heavy throughout the day again despite a stable euro. The US price for a gallon of gas is rising .02/gallon today to $3.97/gallon. It is up .85/gallon in 77 days. Lumber is falling -2.81% and has plunged around -25.0% in just over 2 months. Rice futures are rising another +1.28%. The US dollar continues to trade very poorly. The Greece sovereign cds is rising +2.0% to 1,339.53 bps, the Israeli sovereign cds is jumping +9.3% to 140.50 bps and the Saudi sovereign cds is climbing +12.6% to 114.68 bps. The most frothy parts of the market are getting hit the hardest today with Chinese internet stocks and silver seeing precipitous declines. As well, the sectors that are the most sensitive to global growth are getting hit. I continue to believe the global economy is slowing more than economists expect on soaring food/energy prices, US housing, European austerity, central bank tightening in emerging markets and the Japan nuclear crisis. I suspect commodities, emerging markets and industrials will continue their recent underperformance for awhile. I expect US stocks to trade mixed-to-lower into the close from current levels on profit taking, more shorting, technical selling, global growth concerns, Mideast unrest and emerging markets inflation fears.