Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Less US Economic Optimism, Less Financial Sector Optimism, Market Leader Weakness

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Light
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 17.32 +6.13%
  
• ISE Sentiment Index 106.0 +37.66%
  
• Total Put/Call .85 +1.19%
  
• NYSE Arms 1.18 -15.38%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 95.15 +.91%
  
• European Financial Sector CDS Index 241.71 -.19%
  
• Western Europe Sovereign Debt CDS Index 275.25 +.46%
  
• Emerging Market CDS Index 252.33 -.43%
  
• 2-Year Swap Spread 29.0 -1.25 basis points
  
• TED Spread 37.5 -.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -45.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
  
• Yield Curve 166.0 -1 basis point
  
• China Import Iron Ore Spot $145.40/Metric Tonne unch.
  
• Citi US Economic Surprise Index -14.0 -6.0 points
  
• 10-Year TIPS Spread 2.26 -1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating a -100 open in Japan
• DAX Futures: Indicating +3 open in Germany
  

Portfolio:

• Slightly Lower: On losses in my Tech and Biotech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows on rising Eurozone debt angst, less financial/homebuilder sector optimism, high energy prices, rising global growth fears, weakness in some key market leaders and less US economic optimism. On the positive side, Energy, Oil Service and Coal shares are relatively strong, rising more than +.75%. Copper is rising +.27%. Major Asian indices rose around +.75% overnight(Shanghai Comp, Nikkei closed), led by a +1.7% gain in Hong Kong. The Italian/German 10Y Yld Spread is falling -2.3% to 384.85 bps. The Saudi sovereign cds is falling -1.2% to 119.0 bps. On the negative side, Homebuilding, Education, Construction, HMO, Bank, Steel, Networking and Hospital shares are under meaningful pressure, falling more than -1.25%. Financial shares have lagged throughout the day again. As well, small-cap and cyclical shares are relatively weak. Oil is rising +.2%, Gold is gaining +.2%, Lumber is falling -.8% and the UBS-Bloomberg Ag Spot Index is rising +.4%. Major European indices are falling around -1.0%, led lower by a -1.9% decline in Spain. Spanish equities are now down -18.2% ytd. The Bloomberg European Bank/Financial Services Index is falling -1.0%. The Germany sovereign cds is gaining +2.76% to 85.50 bps and the US sovereign cds is gaining +1.5% to 38.22 bps(+37.0% in 9 days). US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to early-Oct. levels. Lumber is -4.0% since its Dec. 29th high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -19.7% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +634.0% ytd. China's March refined-copper imports fell -8.0% on the month. Singapore Electronics exports decelerated to a gain of +2.8% in March from a +23.3% gain in February. The 10Y T-Note continues to trade too well, despite the big surge in the US sovereign credit default swap and the euro currency can't sustain a bounce. US Economic data releases later this week will likely also prove mildly disappointing. Concerns over the collision course Germany and France appear headed towards during the next escalation phase of the European debt crisis are intensifying. This will eventually become an even greater problem than the market currently perceives, in my opinion. US stocks remain extraordinarily resilient, however breadth and volume remain lackluster. For the recent equity advance to regain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Eurozone debt angst, less US economic optimism, high energy prices, rising global growth fears, weakness in some key market leaders and less financial/homebuilder sector optimism.