Stocks Falling into Final Hour on Rising Eurozone Debt Angst, US Debt Ceiling Concerns, Emerging Markets Inflation Fears, Global Growth Worries

Broad Market Tone:

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

Equity Investor Angst:

• VIX 19.17 +9.42%
  
• ISE Sentiment Index 114.0 -10.24%
  
• Total Put/Call .94 +13.25%
  
• NYSE Arms .88 -7.11%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.32 +1.33%
  
• European Financial Sector CDS Index 144.50 +6.22%
  
• Western Europe Sovereign Debt CDS Index 283.17 -.70%
  
• Emerging Market CDS Index 215.27 +1.60%
  
• 2-Year Swap Spread 22.0 -2 bps
  
• TED Spread 22.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.
  
• Yield Curve 259.0 +2 bps
  
• China Import Iron Ore Spot $174.10/Metric Tonne unch.
  
• Citi US Economic Surprise Index -89.0 +3.8 points
  
• 10-Year TIPS Spread 2.44% +7 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +45 open in Japan
• DAX Futures: Indicating +11 open in Germany

Portfolio:

• Slightly Lower: On losses in my Biotech and Retail sector longs
  
• Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades well off session lows despite terrorism fears, recent stock gains, rising eurozone debt angst, some earnings disappointments, US debt ceiling concerns, emerging markets inflation fears and global growth worries. On the positive side, Utility, Oil Service, Energy, Software, I-Banking, Construction, Ag and Road & Rail shares are flat-to-higher on the day. The Transports are just slightly lower on the day. The UBS-Bloomberg Ag Spot Index is falling -1.22% and oil is down -.62%. On the negative side, Airline, Hospital, Biotech, HMO, Alt Energy, Disk Drive, Networking, Telecom and Oil Tanker shares are under pressure, falling more than -1.0%. Cyclicals are relatively weak. Small-caps are substantially underperforming. (XLF) is underperforming again after recent gains. Gold is jumping +.7% and lumber is falling -.9%. Rice is jumping +2.5%, remaining near a 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 Belgium sovereign cds is gaining +7.33% to 177.81 bps, the Germany sovereign cds is gaining +8.07% to 62.08 bps, the Spain sovereign cds is rising +9.03% to 336.90 bps, the Italy sovereign cds is jumping +10.2% to 278.99 bps, the UK sovereign cds is gaining +5.5% to 70.98 bps and the France sovereign cds is rising +10.2% to 113.72 bps. Chinese equities, which were unable to rally with the rest of the world last week, fell -3.0% last night and are down -4.2% ytd. Italian and Spanish stocks finished near session lows, falling -2.48% and -1.92%, respectively. I continue to believe the rises in German/French cds are large red flags regarding the recent debt deal. Moreover, Italian bonds are already weakening materially, again. As well, slowing growth and rising inflation in key emerging markets remains a larger problem than perceived, in my opinion. Notwithstanding some politicians apparent attempts to spook the equity and bond markets, stocks remain quite resilient in the face of still substantial headwinds. Debt ceiling political posturing will likely continue through week's end. Growth stock leaders continue to trade much better than the broad market. I expect US stocks to trade mixed-to-lower into the close from current levels on rising eurozone debt angst, global growth worries, US debt ceiling concerns, profit-taking and emerging markets inflation fears.