Tuesday, August 16, 2011

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Global Growth Worries, Financial Sector Pessimism, More Shorting


Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 33.60 +5.43%
  • ISE Sentiment Index 90.0 +7.14%
  • Total Put/Call 1.04 -7.14%
  • NYSE Arms 1.74 +354.72%
Credit Investor Angst:
  • North American Investment Grade CDS Index 110.26 -1.17%
  • European Financial Sector CDS Index 194.23 -2.23%
  • Western Europe Sovereign Debt CDS Index 291.17 -1.02%
  • Emerging Market CDS Index 263.85 +2.01%
  • 2-Year Swap Spread 25.0 unch.
  • TED Spread 28.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .01% +1 bp
  • Yield Curve 203.0 -7 bps
  • China Import Iron Ore Spot $176.0/Metric Tonne +.17%
  • Citi US Economic Surprise Index -74.10 +5.0 points
  • 10-Year TIPS Spread 2.16% -5 bps
Overseas Futures:
  • Nikkei Futures: Indicating -40 open in Japan
  • DAX Futures: Indicating -41 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Tech sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my EEM short
  • Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 pulls back after recent gains on rising Eurozone debt angst, financial sector pessimism, global growth worries, emerging markets inflation fears and technical selling. On the positive side, Drug, Retail, Education and Airlines shares are especially strong, rising more than +.5% on the day. Oil is falling -1.08%. Weekly retail sales rose +4.8% versus a +4.8% gain the prior week. On the negative side, Coal, Alt Energy, Oil Tanker, Oil Service, Steel, Internet, Networking, Bank, Construction and Road & Rail shares are under meaningful pressure, falling more than -2.0%. Cyclicals and small-caps are relatively weak. The Transports have underperformed throughout the day again. (XLF) is also trading poorly. The 10-year yield is falling -8 bps to 2.23%. Gold is rising +1.23%, Lumber is falling -1.27%, Copper is falling -.93% and the UBS-Bloomberg Ag Spot Index is up +.96%. Rice is still near a multi-year high, soaring +28.0% in about 7 weeks. The US price for a gallon of gas is falling -.01/gallon today to $3.59/gallon. It is up .45/gallon in about 7 months. The Spain sovereign cds is jumping +7.22% to 354.16 bps, the Portugal sovereign cds is climbing +2.43% to 856.12 bps, the Ireland sovereign cds is rising +2.48% to 755.26 bps, the China sovereign cds is rising +5.3% to 107.25 bps and the Eurozone Investment Grade CDS Index is rising +1.51% to 122.92 bps. Singapore stocks fell -1.45% last night and are down -11.2% ytd. As well, Israeli stocks remain under severe pressure, falling another -1.3%, and are down -20.6% ytd. Today's broad equity market performance is worse than the major averages would suggest, with many economically-sensitive stocks taking another beating. The market's adverse reaction to today's news from Europe, which had been telegraphed for days, is a bad sign. European leaders are doubling down on the poor slash-and-tax polices that are already taking their toll on the region's economic growth, which will lead to further budget shortfalls as tax revenue disappoints. The Citi Eurozone Economic Surprise Index plunged -17.1 points today to -33.3, which is a technical breakdown and the lowest level since March 4th, 2010. I expect US stocks to trade mixed-to-lower into the close from current levels on financial sector pessimism, rising eurozone debt angst, more shorting, global growth worries, emerging markets inflation fears and technical selling.

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