Stocks Slightly Lower into Final Hour on Rising Euirozone Debt Angst, Emerging Markets Inflation Fears, Rising Food/Energy Prices, Profit-Taking

Broad Market Tone:

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

Equity Investor Angst:

• VIX 16.16 +1.83%
  
• ISE Sentiment Index 97.0 +5.43%
  
• Total Put/Call 1.10 +23.60%
  
• NYSE Arms 1.48 +256.63%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.99 +2.12%
  
• European Financial Sector CDS Index 115.67 +2.82%
  
• Western Europe Sovereign Debt CDS Index 228.83 +.37%
  
• Emerging Market CDS Index 206.49 -3.21%
  
• 2-Year Swap Spread 24.0 unch.
  
• TED Spread 25.0 +2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .00% -1 bps
  
• Yield Curve 269.0 -1 bp
  
• China Import Iron Ore Spot $168.50/Metric Tonne +.18%
  
• Citi US Economic Surprise Index -81.30 +3.9 points
  
• 10-Year TIPS Spread 2.35% -4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +48 open in Japan
• DAX Futures: Indicating +27 open in Germany

Portfolio:

• Higher: On gains in my Retail, Biotech and Tech longs
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 moves to session highs despite rising food/energy prices, emerging markets inflation fears, global growth concerns, increasing eurozone debt angst and recent equity gains. On the positive side, Education, Restaurant, REIT, Internet, Paper, Ag, Oil Service and Coal shares are especially strong, rising more than +.75%. Small-Caps are outperforming. (IYR) has traded well throughout the day. Growth stock leaders are also strongly outperforming. Copper is rising +.87%. On the negative side, Alt Energy, Oil Tanker, Defense, Semi, Bank, I-Banking, Insurance, Homebuilding and Airline shares are under pressure, falling more than -.75%. (XLF) has underperformed throughout the day. Cyclicals are also relatively weak. Oil is rising +2.3%, gold is up +1.86%, the UBS-Bloomberg Ag Spot Index is gaining +1.36%, Lumber is falling -1.9% and Rice is up +2.55%. Rice futures are up +14.7% in 5 days. The US price for a gallon of gas is +.02/gallon today to $3.56/gallon. It is up .42/gallon in less than 5 months. The Spain sovereign cds is up +2.78% to 269.71 bps, the Italy sovereign cds is up +6.9% to 195.17 bps, the Belgium sovereign cds is up +3.2% to 150.0 bps, the Portugal sovereign cds is up +4.16% to 771.61 bps and the UK sovereign cds is up +2.09% to 62.86 bps. Moreover, the Eurozone Investment Grade CDS Index is rising +4.8% to 79.59 bps. European contagion fears are rising today on the downgrade of Portugal's debt by Moody's. It surprises me that this was surprising to traders, which is a negative. Stocks remain short-term overbought. However, given the mostly negative news over the holiday weekend, today's healthy consolidation of recent gains is a big positive. I expect US stocks to trade mixed-to-higher from current levels into the close on short-covering, better economic data and technical buying.