Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Tech Sector Weakness, Global Growth Worries, Emerging Markets Inflation Fears

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 38.31 +8.11%
  
• ISE Sentiment Index 89.0 -8.25%
  
• Total Put/Call 1.40 +19.66%
  
• NYSE Arms 1.03 +56.34%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 124.0 -2.70%
  
• European Financial Sector CDS Index 238.32 -1.73%
  
• Western Europe Sovereign Debt CDS Index 301.50 +1.50%
  
• Emerging Market CDS Index 299.46 -1.32%
  
• 2-Year Swap Spread 30.0 +1 bp
  
• TED Spread 32.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 202.0 -2 bps
  
• China Import Iron Ore Spot $178.30/Metric Tonne +.11%
  
• Citi US Economic Surprise Index -68.70 +1.0 point
  
• 10-Year TIPS Spread 2.07% +6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -40 open in Japan
• DAX Futures: Indicating -40 open in Germany

Portfolio:

• Lower: On losses in my Tech, Medical, Biotech and Retail sector longs
  
• Disclosed Trades: Added (IWM)/(QQQ) hedges and added to my (EEM) short, then covered some of them
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 falls meaningfully despite the Buffett/(BAC) deal, rally in (AAPL) shares off the lows, stock gains in Asia overnight and ahead of Bernanke's speech tomorrow. On the positive side, Coal and Homebuilding shares are especially strong, rising over 1.0% on the day. (XLF) has traded very well throughout the day again. Copper is gaining +2.12% and Lumber is rising +.43%. The Japan sovereign cds is falling -3.77% to 108.59 bps and the Belgium sovereign cds is declining -4.9% to 239.83 bps. On the negative side, Energy, Steel, Software, Disk Drive, Networking, Wireless, Biotech, Drug, Hospital, HMO, Restaurant, Gaming, Education, Airline and Tobacco shares are especially weak, falling more than -1.75%. Small-caps are underperforming. Tech shares have lagged throughout the day again. Gold is up +.19%. Oil and food are flat despite stock losses. Rice is still near a multi-year high, rising +26.5% in about 8 weeks. The US price for a gallon of gas is +.01/gallon today to $3.58/gallon. It is up .44/gallon in about 7 months. The Greece sovereign cds is rising +3.50% to 2,302.67 bps, the France sovereign cds is climbing +1.16% to 165.83 bps, the Portugal sovereign cds is gaining +.32% to 1,040.56 bps and the Italy sovereign cds is gaining +.24% to 377.33 bps. The TED spread is at the highest since July 2010. The Eurozone Financial Sector CDS Index is still very near it recent all-time high. The Greece sovereign cds has soared +777 bps since July 22. The Citi Eurozone Economic Surprise Index has plunged -109 points in about 3 weeks to -102.90. Despite gains in most of the rest of Asia overnight, India equities fell another -.85%. They are now down -21.3% ytd and right back to their lows hit 4 days ago. The abrupt plunge in German stocks this morning triggered US equity weakness. Comments out of Germany that the EFSF is currently large enough may have been one of the main catalysts. Germany's DAX is now down -19.2% ytd and continues to trade very poorly. The ongoing rise in key cds remains a large negative. The AAII % Bulls rose to 36.44 this week, while the % Bears rose to 40.96, which is a negative given the current macro backdrop. S&P 500 forward earnings estimates are still at record levels despite the recent sharp deceleration in global economic activity, which could lead to a significant increase in negative earnings pre-announcements over the coming weeks. It is a big negative that the relative strength in (XLF) today has not helped the broad market at all. The fact that the Naz is near its lows(-45) with market leader (AAPL) rallying +17 points off its pre-opening low is also a big negative. I still believe (AAPL) will outperform the market substantially over the intermediate/long-term and would add to my long position again on any extreme market-related weakness in the shares. I expect US stocks to trade modestly lower into the close from current levels on rising eurozone debt angst, tech sector pessimism, global growth worries, more shorting, technical selling and emerging market inflation fears.