Stocks Falling Substantially into Final Hour on Rising Eurozone Debt Angst, US Tax Hike Worries, Global Growth Worries, Financial Sector Pessimism

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Slightly Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 34.27 +4.29%
  
• ISE Sentiment Index 75.0 -13.79%
  
• Total Put/Call 1.27 +14.41%
  
• NYSE Arms 1.83 +84.26%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 133.98 +1.0%
  
• European Financial Sector CDS Index 275.27 +4.30%
  
• Western Europe Sovereign Debt CDS Index 351.17 +1.55%
  
• Emerging Market CDS Index 338.50 +8.0%
  
• 2-Year Swap Spread 30.0 unch.
  
• TED Spread 35.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 166.0 -12 bps
  
• China Import Iron Ore Spot $176.70/Metric Tonne -.39%
  
• Citi US Economic Surprise Index -41.0 +1.3 points
  
• 10-Year TIPS Spread 1.88 -4 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating -200 open in Japan
• DAX Futures: Indicating -12 open in Germany

Portfolio:

• Slightly Lower: On losses in my Biotech, Medical and Retail sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my EEM short and then covered some of them
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 reverses hard this afternoon at its downward-sloping 50-day moving average on rising Eurozone debt angst, US tax hike concerns, some disappointing FOMC commentary, rising financial sector pessimism, emerging markets inflation fears, technical selling, more shorting and global growth worries. On the positive side, Computer Hardware shares are holding up relatively well, falling less than -.5%. Oil is falling -1.17%, the UBS-Bloomberg Ag Spot Index is down -1.7% and Gold is down -1.3%. The Ireland sovereign cds is falling -2.24% to 800.0 bps. On the negative side, Road & Rail, Coal, Oil Tanker, Oil Service, Steel, Bank, I-Bank, Insurance, Construction, Homebuilding, REIT and Education shares are under significant pressure, falling more than -4.0%. Cyclicals and small-caps are substantially underperforming again. (XLF) has traded very poorly throughout the day. Copper is falling -.4% and Lumber is down -.2%. Rice is still very near its multi-year high, rising +32.2% in about 11 weeks. The average US price for a gallon of gas is -.01/gallon today to $3.57/gallon. It is up .43/gallon in about 7 months. The Germany sovereign cds is gaining +5.48% to 99.50 bps, the China sovereign cds is gaining +3.85% to 140.24 bps, the UK sovereign cds is gaining +3.12% to 88.0 bps, the France sovereign cds is surging +2.51% to 190.83 bps, the Italy sovereign cds is rising +1.85% to 522.17 bps, the Belgium sovereign cds is gaining +2.45% to 278.83 bps, the Brazil sovereign cds is gaining +7.6% to 185.23 bps and the Spain sovereign cds is jumping +3.35% to 431.83 bps. The Germany and Italy sovereign cds made new record highs again today. The France and Spain sovereign cds are still very near their record highs. The China sovereign cds is braking to the highest level since April 2009. The Brazil sovereign cds is surging to the highest since July 2009. The Russia sovereign cds is close to breaking out of a multi-year trading range. The Western Europe Sovereign CDS Index and European Financial Sector CDS Index are still near their all-time highs. The 2-Year Euro Swap Spread is very close to a multi-year high. The TED spread is still very near the highest level since July 2010 despite Europe's recent efforts. The China Blended Corporate Spread Index is continuing its parabolic move higher, rising another +10.0 bps to 693.0 bps. The Emerging Markets Currency VIX continues to surge, rising another 9.4% to 15.77. Hong Kong shares fell another -1.0% today and are back at their recent lows, falling -18.3% ytd. Russian shares fell another -1.0% today and are back near their recent lows, falling -15.1% ytd. As well, the major European equity indices fell -1.5 to -2.0% today. The 10-year yield continues to fall too much, declining -7 bps to 1.86%. Various credit gauges continue to indicate rising global recession fears. I don't believe the broad equity market is pricing in recession even though many cyclical stocks have been crushed. Select growth stock leaders continue to trounce the major averages. The situation in Europe must at least stabilize very soon or a full test of the August lows is likely. I expect US stocks to trade modestly lower into the close from current levels on profit-taking, rising Eurzone debt angst, more financial sector pessimism, global growth worries, technical selling, emerging markets inflation fears, US tax hike worries and more shorting.