Stocks Falling into Final Hour on US Debt Ceiling Concerns, Emerging Market Inflation Fears, Rising Food/Energy Prices, Global Growth Worries

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Light
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 19.79 +2.27%
  
• ISE Sentiment Index 123.0 +13.89%
  
• Total Put/Call .75 -19.35%
  
• NYSE Arms .75 -12.14%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.02 -.32%
  
• European Financial Sector CDS Index 153.45 +6.75%
  
• Western Europe Sovereign Debt CDS Index 285.50 +.82%
  
• Emerging Market CDS Index 213.47 -1.08%
  
• 2-Year Swap Spread 23.0 +1 bp
  
• TED Spread 20.0 -2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .05% +2 bps
  
• Yield Curve 256.0 -3 bps
  
• China Import Iron Ore Spot $175.30/Metric Tonne +.11%
  
• Citi US Economic Surprise Index -83.80 +5.2 points
  
• 10-Year TIPS Spread 2.40% -4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +8 open in Japan
• DAX Futures: Indicating +10 open in Germany

Portfolio:

• Slightly Higher: On gains in my Technology and Retail sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges, then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades modestly lower despite recent stock gains, eurozone debt angst, some earnings disappointments, US debt ceiling concerns, rising food/energy prices, emerging markets inflation fears and global growth worries. On the positive side, Education, Wireless, Networking, Computer and Internet shares are especially strong, rising more than +.75%. The MS Tech Index is substantially outperforming. Copper is rising +1.67%. Weekly retail sales rose +4.2% this week versus a +4.6% gain the prior week. The Spain sovereign cds is falling -9.94% to 302.90 bps and the Italy sovereign cds is falling -3.35% to 271.13 bps. On the negative side, Coal, Steel, Disk Drive, Biotech, Construction, Homebuilding and Road & Rail shares are under pressure, falling more than -.75%. Cyclicals and small-caps are relatively weak. Oil is rising +.34%, gold is gaining +.15%, the UBS-Bloomberg Ag Spot Index is rising +1.24% and lumber is falling -.43%. Rice is rising +.32%, hitting a new multi-year high, and has soared about +31.0% in less than 3 weeks. The US price for a gallon of gas is unch. today at $3.69/gallon. It is up .55/gallon in less than 5 months. The France sovereign cds is gaining +1.27% to 115.33 bps and the Greece sovereign cds is gaining +1.45% to 1,658.81 bps. The France sovereign cds is now only 9 bps away from its record high hit 5 days ago. Chinese equities were only able to bounce +.5% last night after recent sharp losses. India's Sensex fell another -1.9% and is now down -9.7% ytd. As well, Brazil's Bovespa continues to be one of the world's worst performers, falling another -1.0% today, and is down -14.33% ytd. Notwithstanding some politicians ongoing attempts to spook the equity and bond markets, stocks remain quite resilient in the face of still substantial headwinds. The 10-year yield is falling -5 bps to session lows at 2.95%. I continue to believe US debt ceiling political posturing will likely continue through at least week's end. Growth stock leaders continue to trade much better than the broad market, a trend that should continue over the longer-term. I expect US stocks to trade mixed-to-lower into the close from current levels on eurozone debt angst, global growth worries, US debt ceiling concerns, profit-taking, rising food/energy prices and emerging markets inflation fears.