Stocks Falling into Final Hour on Tech Sector Pessimism, Rising Food/Energy Prices, Eurozone Debt Angst, Global Growth Worries

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: About Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 18.81 +2.23%
  
• ISE Sentiment Index 140.0 +70.73%
  
• Total Put/Call 1.02 -12.07%
  
• NYSE Arms 1.07 -79.09%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 96.76 +.53%
  
• European Financial Sector CDS Index 141.67 -1.86%
  
• Western Europe Sovereign Debt CDS Index 288.50 +3.34%
  
• Emerging Market CDS Index 218.64 +.42%
  
• 2-Year Swap Spread 29.0 +1 bp
  
• TED Spread 23.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .02% +1 bp
  
• Yield Curve 254.0 -1 bp
  
• China Import Iron Ore Spot $173.10/Metric Tonne +1.06%
  
• Citi US Economic Surprise Index -99.10 -11.3 points
  
• 10-Year TIPS Spread 2.29% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -100 open in Japan
• DAX Futures: Indicating +20 open in Germany

Portfolio:

• Slightly Higher: On gains in my Retail, Biotech, Medical sector longs and Emerging Markets shorts
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades slightly lower despite eurozone debt angst, Asian equity weakness, emerging markets inflation fears, tech sector pessimism, rising food/energy prices, US debt ceiling worries and global growth concerns. On the positive side, Education, Insurance, HMO and Medical Equipment shares are especially strong, rising more than +.75%. (XLF)/(IYR) have outperformed throughout the day. Lumber is rising +1.97% and copper is gaining +.69%. The Spain sovereign cds is falling -3.95% to 318.22 bps and the Portugal sovereign cds is falling -6.3% to 1,062.27 bps. Weekly retail sales rose +5.4% this week versus a +3.8% gain the prior week. On the negative side, Airline, Road & Rail, Wireless, Semi, Networking, Software, Paper, Steel, Oil Service and Alt Energy shares are especially weak, falling more than -1.0%. Tech shares have been heavy throughout the day. Gold is up +.77%, oil is rising +1.8% and the UBS-Bloomberg Ag Spot Index is gaining +2.4%. Rice is jumping +3.6%. The US price for a gallon of gas is +.01/gallon today to $3.64/gallon. It is up .50/gallon in less than 5 months. The China sovereign cds is gaining +2.09% to 90.50 bps, the US sovereign cds is gaining +2.5% to 51.25 bps, the Brazil sovereign cds is gaining +1.68% to 115.66 bps and the Japan sovereign cds is gaining +1.7% to 93.90 bps. The Emerging Markets Sovereign CDS Index is surging +10.0% to 190.75 bps. The Western Europe Sovereign CDS Index is hitting another record high. The Citi Asia-Pacific Economic Surprise Index has broken down technically, falling -10.0 points today to -19.80, which is the worst level since April 29th, 2009. The Hang Seng fell -3.06% last night, finishing at session lows, and continues to trade poorly. This index is down -5.96% ytd. As well, Brazil's Bovespa fell another -.9% today and is down -13.8% ytd. The UBS-Bloomberg Ag Spot Index is close to a technical breakout, which is a large negative. The fact that some in the Fed are even contemplating QE3 at this point is a large negative, given the hugely destabilizing consequences of QE2. Given that it appears US economic strategy relies heavily on our multi-national exports to developing nations, further negative pressure on the US dollar would only exacerbate the already problematic inflation in emerging markets, thus raising the odds of hard landings in those same economies that we are heavily relying upon. While short-term traders would likely cheer QE3, any further QE would greatly curtail the lifespan of the current global economic recovery, in my opinion. I still believe the situation in Europe needs to stabilize, commodity prices need to fall further, the US debt ceiling issue needs resolution and forward earnings guidance must be ok for stocks to build meaningfully on their recent rally off the lows. I expect US stocks to trade mixed-to-lower into the close from current levels on eurozone debt angst, emerging markets inflation fears, rising food/energy prices, tech sector pessimism, US debt ceiling concerns, profit-taking, more shorting and global growth worries.