Stocks Lower into Final Hour on Rising Eurozone Debt Angst, Global Growth Fears, Financial/Tech Sector Pessimism, Rising Energy Prices

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 31.65 -3.83%
  
• ISE Sentiment Index 106.0 unch.
  
• Total Put/Call 1.02 -5.56%
  
• NYSE Arms 1.84 -22.70%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 141.44 +.99%
  
• European Financial Sector CDS Index 304.04 +5.85%
  
• Western Europe Sovereign Debt CDS Index 361.33 +1.12%
  
• Emerging Market CDS Index 335.46 +.07%
  
• 2-Year Swap Spread 52.0 -2 bps
  
• TED Spread 49.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .01% +1 bp
  
• Yield Curve 167.0 -2 bps
  
• China Import Iron Ore Spot $146.60/Metric Tonne -.54%
  
• Citi US Economic Surprise Index 40.80 -8.1 points
  
• 10-Year TIPS Spread 1.90 -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating -40 open in Japan
• DAX Futures: Indicating +28 open in Germany

Portfolio:

• Slightly Higher: On gains in my medical/biotech sector longs and index hedges
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 gives back most of its mid-day reversal higher on rising Eurozone debt angst, global growth fears, financial/tech sector pessimism, high energy prices and technical selling. On the positive side, Biotech, Medical, Gaming and Restaurant shares are higher on the day. Large-cap "growth" shares are outperforming. Copper is rising +.32% and the UBS-Bloomberg Ag Spot Index is declining -.38%. Johnson Redbook weekly retail sales rose +3.3% this week versus a +3.2% gain the prior week. Over the last 3 weeks weekly sales have averaged a +3.2% gain versus a +4.6% average weekly increase during October. On the negative side, Coal, Oil Tanker, Oil Service, Utility, Steel, Paper, Semi, Networking, I-Banking and Airline shares are under meaningful pressure, falling more than -1.5%. Small-cap and cyclical shares are underperforming again. (XLF)/(XLK) have also underperformed throughout the day. Oil is rising +.72%, gold is gaining +1.1% and lumber is falling -1.7%. The 10-year yield is falling -2 bps to session lows at 1.94%. Major European equity indices fell 1-1.5% on average today. Italian shares(-29.2% ytd) were Europe's worst-performers again today, falling -1.54%. The Germany sovereign cds is climbing +4.57% to 101.67 bps, the France sovereign cds is climbing +5.95% to 243.54 bps, the Spain sovereign cds is gaining +4.28% to 485.83 bps, the Italy sovereign cds is climbing +2.7% to 551.11 bps, the China sovereign cds is gaining +2.0% to 158.0 bps, the UK sovereign cds is gaining +4.32% to 96.15 bps, the Japan sovereign cds is gaining +3.05% to 122.91 bps and the Belgium sovereign cds is gaining +6.67% to 354.88 bps. Moreover, the Emerging Markets Sovereign CDS Index is jumping +3.05% to 309.50 bps. The France and Belgium sovereign cds are making new all-time highs and the Spain, Hungary, Italy sovereign cds are very close to their recent record highs. The TED spread continues to trend higher and is at the highest since June 2010. The 2-Year Swap spread is near the highest since May 2010. The FRA/OIS Spread is near the highest since May 2010. The 2yr Euro Swap Spread is near the highest since Nov. 2008. The 3M Euro Basis Swap is near the worst since November 2008. The Libor-OIS spread is near the widest since July 2009, which is also noteworthy considering the recent equity advance off the lows. China Iron Ore Spot has plunged -23.6% since February 16th and -19.0% since Sept. 7th. The announcement from the IMF today will not have a meaningfully positive impact on the situation in Europe unless accompanied by a politically suicidal large funding increase, in my opinion. As well, recent statements from Germany should trouble investors. Trading still has a somewhat complacent feel to it as stocks surged off the morning lows again on the IMF announcement, accompanied by below average volume, despite the ongoing significant deterioration in European credit gauges. I still think the risk in equities remains substantial unless a positive catalyst emerges from Europe very soon. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Eurozone debt angst, rising global growth fears, financial/tech sector pessimism, more shorting, rising energy prices and technical selling.