Wednesday, August 17, 2011

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

Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Mixed
  • Volume: Slightly Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 32.53 -1.19%
  • ISE Sentiment Index 103.0 +5.14%
  • Total Put/Call 1.43 +37.50%
  • NYSE Arms 1.06 -34.82%
Credit Investor Angst:
  • North American Investment Grade CDS Index 109.62 -.58%
  • European Financial Sector CDS Index 195.90 +3.75%
  • Western Europe Sovereign Debt CDS Index 292.17 +.34%
  • Emerging Market CDS Index 258.22 -1.99%
  • 2-Year Swap Spread 25.0 unch.
  • TED Spread 28.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .01% unch.
  • Yield Curve 198.0 -5 bps
  • China Import Iron Ore Spot $176.80/Metric Tonne +.45%
  • Citi US Economic Surprise Index -72.90 +1.2 points
  • 10-Year TIPS Spread 2.13% -3 bps
Overseas Futures:
  • Nikkei Futures: Indicating -17 open in Japan
  • DAX Futures: Indicating -38 open in Germany
  • Slightly Higher: On Medical sector longs and ETF hedges
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of 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 hugs the flatline despite global growth worries, Eurozone debt angst, rising food/energy prices, emerging markets inflation fears and tech sector weakness. On the positive side, Telecom, Tobacco, Utility, Oil Service, Bank and Construction shares are especially strong, rising more than +.75% on the day. (XLF) has traded well throughout the day. Copper is rising +1.12% and Lumber is gaining +.43%. The Germany sovereign cds is falling -4.04% to 74.33 bps, the France sovereign cds is falling -6.03% to 137.67 bps, the Spain sovereign cds is falling -6.61% to 331.0 bps and the Israel sovereign cds is falling -4.6% to 149.29 bps. Moreover, the Eurozone Investment Grade CDS Index is down -2.0% to 120.22 bps. On the negative side, Computer, Software, Alt Energy, Internet, Disk Drive, Networking and Education shares are under pressure, falling more than -1.0%. Cyclicals and small-caps are relatively weak again. The Transports have underperformed throughout the day again and tech shares trade very poorly. The 10-year yield is falling -5 bps to 2.17%. Gold is rising +.22%, oil is rising +.67% and the UBS-Bloomberg Ag Spot Index is jumping +2.0%. Rice is rising +.69%, and is still near a multi-year high, rising +29.0% in about 7 weeks. The US price for a gallon of gas is falling -.01/gallon today to $3.58/gallon. It is up .44/gallon in about 7 months. The China sovereign cds is rising +2.28% to 109.50 bps, the Greece sovereign cds is rising +2.85% to 1,853.31 bps and the Ireland sovereign cds is rising +1.19% to 763.50 bps. The China Development Bank Corp. cds has gone parabolic over the last month and is not pulling back with most other cds, rising another +6.3 bps today to 225.30 bps. German stocks traded poorly today despite gains in Asia and other parts of Europe today. The DAX fell -.77% and is down -13.96% ytd. Today's broad equity market performance is worse than the major averages would suggest again, with many economically-sensitive stocks under pressure for the second day in a row. Weak tech and strong financial shares have been playing tug-o-war all day. The Citi Eurozone Economic Surprise Index plunged another -33.1 points today to -66.4, which is the lowest level since April 20th, 2009. It has dropped -50.2 points in 2 days, which is a large negative. Moreover, the UBS-Bloomberg Ag Spot Index is now just .8% from its Feb. 9th record high, which makes any further central bank stimuli extremely risky. The market is mostly ignoring quite a bit of negative news today, which is a large positive. The odds of a new global recession appear to be higher than investors currently perceive, in my opinion. I would like to see the tech sector firm up before getting more aggressive on the long side. I expect US stocks to trade mixed-to-lower into the close from current levels on tech sector pessimism, eurozone debt angst, tax hike fears, more shorting, global growth worries, emerging markets inflation fears and rising food/energy prices.

No comments: