Stocks Rising Slightly into Final Hour on Euro Bounce, More Financial Sector Optimism, Short-Covering, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Mixed
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 18.55 -2.21%
  
• ISE Sentiment Index 106.0 +29.27%
  
• Total Put/Call .90 +9.76%
  
• NYSE Arms .95 -52.06%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 99.85 -1.09%
  
• European Financial Sector CDS Index 256.28 +1.84%
  
• Western Europe Sovereign Debt CDS Index 280.35 -1.35%
  
• Emerging Market CDS Index 265.59 -.32%
  
• 2-Year Swap Spread 31.25 -.25 basis point
  
• TED Spread 38.50 -1.0 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -46.0 +1.5 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% +1 basis point
  
• Yield Curve 170.0 +2 basis points
  
• China Import Iron Ore Spot $146.70/Metric Tonne -.95%
  
• Citi US Economic Surprise Index 4.20 -.1 point
  
• 10-Year TIPS Spread 2.26 +2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a +47 open in Japan
• DAX Futures: Indicating -21 open in Germany
  

Portfolio:

• Slightly Lower: On losses in my Tech and Retail sector longs
  
• 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 mildly bullish as the S&P 500 trades slightly higher despite Eurozone debt angst, less tech sector optimism, high energy prices, rising global growth fears and less US economic optimism. On the positive side, Oil Tanker, Oil Service, Telecom, Homebuilding, Road & Rail, Airline and REIT shares are especially strong, rising more than +1.0%. The Transports and Financials have traded well throughout the day. Lumber is rising +1.97% and Copper is gaining +1.2%. The 10Y Yld is rising +3 bps to 1.96%. Major European indices rose around +1.75%, led by a +2.5% gain in Italy. The Bloomberg European Bank/Financial Services Index rose +2.0%. The Germany sovereign cds is down -3.0% to 87.50 bps, the France sovereign cds is down -3.5% to 198.0 bps, the Spain sovereign cds is down -3.8% to 490.66 bps and the Italy sovereign cds is down -3.0% to 454.42 bps. Moreover, the European Investment Grade CDS Index is down -2.7% to 145.31 bps. On the negative side, Software, Semi, HMO, Retail, Restaurant, Education and Internet shares are under pressure, falling more than -.75%. Tech shares have traded poorly throughout the day again. Oil is rising +.4% and the UBS-Bloomberg Ag Spot Index is rising +.4%. Major Asian indices were mixed overnight as a +.65% gain in India was offset by a -.78% decline in Japan. The Portugal sovereign cds is gaining +.4% to 1,023.19 bps. US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak despite investor perceptions that the US economy is accelerating. Moreover, the Citi US Economic Surprise Index has fallen back to mid-Oct. levels. Lumber is -6.0% since its Dec. 29th high despite the better US economic data, improving sentiment towards homebuilders and the broad equity rally. 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 -19.2% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +668.0% 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 recent weak/erratic technical action in shares of (AAPL), a market-leader and the largest company in the world, remains a concern. Long AAPL. Bonds still trade too well, copper continues to trade poorly and the euro currency can't sustain a bounce. Comments from German officials today lead me to conclude that a new French president would clash greatly with Merkel, which will become a major problem during the next escalation phase of the region's debt crisis. There remains a fairly high level of complacency among US investors regarding the rapidly deteriorating situation in Europe, in my opinion. I still believe more European bank/sovereign downgrades are likely on the horizon. Overall, the major averages are not responding well to a better-than-expected earnings season so far. (TXN) gappped higher after-hours yesterday on a "good report" only to fall throughout the day and finish near session lows, down -1.7%. 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 Eurozone debt angst, less US economic optimism, high energy prices, rising global growth fears, weakness in some key market leaders and less tech sector optimism.