Wednesday, August 10, 2011

Stocks Sharply Lower into Final Hour on Soaring Eurozone Debt Angst, US Tax Hike Concerns, Global Growth Worries, Financial Sector Pessimism

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Heavy
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 37.56 +7.3%
  • ISE Sentiment Index 104.0 -37.7%
  • Total Put/Call 1.18 -8.53%
  • NYSE Arms 1.95 +480.10%
Credit Investor Angst:
  • North American Investment Grade CDS Index 113.73 +.93%
  • European Financial Sector CDS Index 212.93 +17.7%
  • Western Europe Sovereign Debt CDS Index 290.83 unch.
  • Emerging Market CDS Index 282.65 -3.06%
  • 2-Year Swap Spread 24.0 -1 bp
  • TED Spread 27.0 +3 bps
Economic Gauges:
  • 3-Month T-Bill Yield .02% -2 bps
  • Yield Curve 298.0 -10 bps
  • China Import Iron Ore Spot $176.20/Metric Tonne -.90%
  • Citi US Economic Surprise Index -70.50 +1.0 point
  • 10-Year TIPS Spread 2.31% +13 bps
Overseas Futures:
  • Nikkei Futures: Indicating -143 open in Japan
  • DAX Futures: Indicating +150 open in Germany
  • Slightly Lower: On losses in my Biotech, Medical and Tech sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short
  • Market Exposure: Moved to 25% Net Long
BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 was unable to build on yesterday's sharp reversal higher, on rising eurozone debt angst, US tax hike concerns, FOMC statement disappointment, financial sector pessimism, emerging market inflation fears and global growth worries. On the positive side, Coal, Steel, Paper and REIT shares are especially strong, rising more than +.5% on the day. (IYR) has traded well throughout the day. On the negative side, Defense, Oil Tanker, Networking, Computer Service, Bank, I-Banking, Medical Equipment, Biotech, Drug, Insurance, Retail, Airline and Tobacco shares are especially weak, falling more than -3.0% on the day. (XLF) has been under tremendous pressure throughout the day. Gold is +2.5%, Oil is up +1.75%, Lumber is falling -2.24%, the UBS-Bloomberg Ag Spot Index is up +.25% and Copper is down -.83%. Rice is up another +1.0% and is near a multi-year high, soaring about +28.0% in about 6 weeks. The US price for a gallon of gas is falling -.01/gallon today to $3.64/gallon. It is up .50/gallon in about 6 months. The 10-year yield is falling too rapidly again, dropping -11 bps to 2.14%. The +13 bps jump in the TIPS spread is a bit odd considering today's broad market action. The Spain sovereign cds is soaring +12.45% to 391.85 bps, the Italy sovereign cds is rising +11.8% to 383.0 bps, the Belgium sovereign cds is gaining +13.77% to 276.67 bps, Russia sovereign cds is rising another +2.88% to 203.0 bps, the UK sovereign cds is rising +3.84% to 86.0 bps, the France sovereign cds is jumping +8.20% to 175.0 bps and the Germany sovereign cds is rising +3.21% to 85.67 bps. The Emerging Markets Sovereign CDS Index is soaring +27.0 bps today to 233.0 bps. The France sovereign cds is making another new record high again today and has risen +83.0 bps in 14 days. The German sovereign cds is hitting another multi-year high and is only 7.0 bps from its Feb. 09 high of 93.0 bps. The Eurozone Financial Sector CDS Index is taking out its March 09 record high. The 3-Month Euribor-OIS spread is jumping another +8 bps to a multi-year high of 70.0 bps. Despite gains in the rest of Asia, Singapore fell another -2.2% last night and is down -11.6% ytd. As well, South Korea(+.27%) and China(+.91%) had uninspiring rebounds overnight. Germany fell another -5.1% today and is now down 18.8% ytd. As well, France fell -5.5% and is down 21.1% ytd. Spain(-5.5%) and Italy(-6.65%) also suffered severe losses again and are down -19.2% and -27.2% ytd, respectively. The ongoing surge in many key emerging markets cds remains a big negative. As well, a number of key European cds continue to soar as the pressure on the financial sector mounts. The eurozone situation has that spinning out of control feel to it, once again. The cds and equity markets continue to telegraph rising worries among investors over the implications to Germany and France of recent ECB actions. I suspect the German public is irate with what is currently transpiring, which could further exacerbate the situation longer-term. As well, the markets continue to price in another global recession. Select growth stocks are holding up relatively well today. The market is deeply oversold again, however Europe needs to at least shows some signs of stabilizing. I plan to cover some of my hedges into the close. I expect US stocks to trade mixed-to-lower into the close from current levels on soaring eurozone debt angst, US tax hike worries, more shorting, technical selling, emerging markets inflation fears, rising food/energy prices, financial sector pessimism and forced margin selling.


Anonymous said...

Economic woes offer awkward backdrop for Obama's vacation

Anonymous said...

do you ever go to 0% long?