Friday, September 09, 2011

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

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Every Sector Declining
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 40.46 +17.89%
  • ISE Sentiment Index 68.0 -37.61%
  • Total Put/Call 1.47 +32.43%
  • NYSE Arms 6.18 +289.97%
Credit Investor Angst:
  • North American Investment Grade CDS Index 130.60 +6.61%
  • European Financial Sector CDS Index 284.58 +12.68%
  • Western Europe Sovereign Debt CDS Index 332.33 +3.64%
  • Emerging Market CDS Index 308.80 +7.19%
  • 2-Year Swap Spread 35.0 +4 bps
  • TED Spread 33.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .00% -1 bp
  • Yield Curve 175.0 -4 bps
  • China Import Iron Ore Spot $179.50/Metric Tonne -.22%
  • Citi US Economic Surprise Index -41.80 +.5 point
  • 10-Year TIPS Spread 1.98% -3 bps
Overseas Futures:
  • Nikkei Futures: Indicating -267 open in Japan
  • DAX Futures: Indicating -36 open in Germany
  • Slightly Lower: On losses in my Tech, Biotech and Medical sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short and then covered some
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 trades substantially lower, near session lows, on rising Eurozone debt angst, more financial sector pessimism, forced selling, more shorting, terrorism fears, emerging markets inflation fears, technical selling and global growth worries. On the positive side, Semi shares are holding up relatively well, falling less than -1.0%. Oil is falling -1.8%, Gold is declining -1.0% and the UBS-Bloomberg Ag Spot Index is falling -.4%. On the negative side, Alt Energy, Oil Service, Steel, Networking, Medical, Hospital, HMO, Construction, Homebuilding, REIT, Restaurant and Road & Rail shares are under significant pressure, falling more than -4.0%. (XLF) traded poorly throughout the day. Small-caps are also underperforming. Lumber is down -3.58% and Copper is falling -3.46%. Rice is surging +2.8% today and is right back to its multi-year high, rising +38.0% in about 9 weeks. The average US price for a gallon of gas is +.01/gallon today to $3.66/gallon. It is up .52/gallon in about 7 months. The Germany sovereign cds is gaining +6.55% to 84.17 bps, the France sovereign cds is surging +5.96% to 180.83 bps, the Spain sovereign cds is surging +5.42% to 412.50 bps, the Italy sovereign cds is gaining +8.14% to 468.17 bps, the Greece sovereign cds is soaring +22.9% to 3,470.13 bps, the Ireland sovereign cds is gaining +4.4% yo 866.67 bps, the Russian sovereign cds is gaining +8.6% to 213.67 bps, the Brazil sovereign cds is rising +5.8% to 160.68 bps, the Portugal sovereign cds is gaining +6.43% to 1,128.33 bps, the Belgium sovereign cds is gaining +5.95% to 287.17 bps and the UK sovereign cds is rising +5.01% to 80.67 bps. Moreover, the Eurozone Investment Grade CDS Index is surging +9.5% to 173.59 bps, which is the highest since April 2009. The Greece and Italy sovereign cds are hitting all-time highs today. The Portugal, France, Spain, Belgium and Germany sovereign cds are very close to their record highs. The Eurozone Financial Sector and Western European Sovereign CDS Indices are making new all-time highs. The 3-Month Euribor-OIS Spread is surging +8 bps to a new multi-year high at 83.0 bps. The 3-Month Euro Basis Swap is plunging -12.29 bps to a multi-year low of -107.21 bps. The The UBS-Bloomberg Ag Spot Index is still near its recent record high, which is also a large negative. India's Sensex was the worst-performer in Asia overnight, declining -1.74%, and is now down -17.8% ytd. The major European stock indices plunged around -4.0% today and are right back at their lows for the year. Germany's DAX continues to trade horribly and is now down -25.0% ytd. Most gauges of eurozone debt angst remain very elevated and continue to trend higher, which remains a large concern. The euro currency's decline is beginning to become disorderly which is always a stock market negative. As well, the credit markets are beginning to seize up too much. I still think the euro has much further downside longer-term, notwithstanding any near-term oversold technical bounce. It remains a big negative that earnings expectations are still near record levels despite the obviously large deceleration in global growth. Some of today's decline is likely related to terrorism fears over the weekend, however any rally on Monday will likely prove short-lived until the situation in Europe stabilizes. I expect US stocks to trade mixed-to-lower into the close from current levels on rising eurozone debt angst, more financial sector pessimism, more shorting, terrorism fears, emerging markets inflation fears, technical selling, forced selling and global growth worries.

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