Stocks Surging into Final Hour on Diminishing Eurozone Debt Angst, Less Financial Sector Pessimism, Buyout Speculation, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Every Sector Rising
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 32.11 -11.69%
  
• ISE Sentiment Index 89.0 -7.29%
  
• Total Put/Call 1.17 +7.34%
  
• NYSE Arms .41 -64.52%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 111.56 -2.61%
  
• European Financial Sector CDS Index 198.30 -5.11%
  
• Western Europe Sovereign Debt CDS Index 294.17 -.34%
  
• Emerging Market CDS Index 258.95 -5.66%
  
• 2-Year Swap Spread 25.0 -1 bp
  
• TED Spread 29.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% -1 bp
  
• Yield Curve 210.0 +5 bps
  
• China Import Iron Ore Spot $175.70/Metric Tonne -.11%
  
• Citi US Economic Surprise Index -79.10 -.2 point
  
• 10-Year TIPS Spread 2.21% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +59 open in Japan
• DAX Futures: Indicating +36 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Medical, Retail and Tech sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short and then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 builds on last week's reversal higher on less Eurozone debt angst, buyout speculation, short-covering, less financial sector pessimism and bargain-hunting. On the positive side, Airline, REIT, Homebuilding, Hospital, Bank, Wireless, Oil Service, Energy, Alt Energy, Coal and Utilities shares are especially strong, rising more than +3.0% on the day. Small-caps are outperforming. (XLF)/(IYR) have traded well throughout the day. Copper is rising +.52% and Lumber is gaining +3.28%. The France sovereign cds is down -4.2% to 146.83 bps, the Italy sovereign cds is down -3.76% to 344.450 bps, the Germany sovereign cds is dropping -3.67% to 76.58 bps, the UK sovereign cds is dropping -4.62% to 76.48 bps and the Spain sovereign cds is down -6.84% to 330.35 bps. Moreover, the European Investment Grade CDS Index is down -6.01% to 121.22 bps. On the negative side, Steel, Internet, Medical Equipment, Retail, Restaurant, Education and Road & Rail shares are underperforming, rising less than 1.0%. The Transports have underperformed throughout the day. The 10-year yield is only +3 bps higher to 2.29%, despite today's equity rally. Oil is jumping +3.0%, Gold is rising +1.08% and the UBS-Bloomberg Ag Spot Index is up +.7%. 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 $3.60/gallon. It is up .46/gallon in about 7 months. The TED spread is rising to the highest level since August 2010 today, despite the euro bounce and equity rally. European equities meaningfully underperformed the rest of the world today. However, the large drop in a number of key Eurozone cds remains a big positive. It is still hard to gauge how much of the recent equity rally is mainly related to short-covering. This year's worst-performers are leading today and volume is subdued. Some key German and French officials continue to throw cold water on the idea of a meaningful increase in the EFSF or the idea of eurobonds, yet the market seems to be anticipating these. I expect US stocks to trade mixed-to-higher into the close from current levels on less financial sector pessimism, diminishing eurozone debt angst, buyout speculation, short-covering and bargain-hunting.