Broad Market Tone: - Advance/Decline Line: Higher
- Sector Performance: Mixed
- Volume: Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst: - VIX 18.55 -3.18%
- ISE Sentiment Index 85.0 +13.33%
- Total Put/Call .92 -9.8%
- NYSE Arms .95 -49.38%
Credit Investor Angst:- North American Investment Grade CDS Index 99.68 +.85%
- European Financial Sector CDS Index 244.12 -.05%
- Western Europe Sovereign Debt CDS Index 275.55 +.75%
- Emerging Market CDS Index 248.49 +.60%
- 2-Year Swap Spread 29.75 +.75 basis point
- TED Spread 39.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -41.5 unch.
Economic Gauges:- 3-Month T-Bill Yield .08% +1 basis point
- Yield Curve 162.0 unch.
- China Import Iron Ore Spot $144.10/Metric Tonne unch.
- Citi US Economic Surprise Index -23.10 +.3 point
- 10-Year TIPS Spread 2.20 -1 basis point
Overseas Futures: - Nikkei Futures: Indicating a +109 open in Japan
- DAX Futures: Indicating +19 open in Germany
Portfolio:
- Slightly Higher: On gains in my Medical and Biotech sector longs
- Disclosed Trades: None
- Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite rising Eurozone debt angst, less tech sector optimism, high energy prices, rising global growth fears and less US economic optimism. On the positive side, Internet, Bank, Biotech, HMO, REIT and Airline shares are especially strong, rising more than +.75%. The Transports and Banks have outperformed throughout the day. Oil is falling -.5%, Gold is down -.33% and Copper is gaining +1.0%. The US sovereign cds is down -2.0% to 39.22 bps.
Major European indices are mostly higher, led by a +2.6% gain in Italy. The Bloomberg European Bank/Financial Services Index is rising +1.5%. On the negative side, Oil Tanker, Ag, Software, Disk Drive and Computer Service
shares are under pressure, falling more than -.75%. Tech shares have lagged throughout the day. Lumber is down -1.5%. Major Asian Indices fell around -2.0% overnight, led lower by a -2.8% decline in Japan(Nikkei -10.4% in less than 6 weeks and close to 200-day ma test). Australia fell -2.2% overnight, closed below its 50-day ma and is testing its intermediate-term uptrend.
The Germany sovereign cds is gaining +.79% to 84.83 bps, the France sovereign cds is rising +1.3% to 193.25 bps, the Spain sovereign cds is rising +.91% to 484.55 bps, the Italy sovereign cds is rising +1.0% to 440.88 bps, the Ireland sovereign cds is gaining +1.9% to 576.89 bps and the Japan sovereign cds is surging +4.2% to 98.5 bps. Moreover, the China Blended Corporate Spread Index is gaining +3.1% to 594.0 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.
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 -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +582.0% 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.
Oil is trading very poorly of late, which is a broad market positive and helping to boost the transports today. Crude looks poised for further short/intermediate-term losses barring any meaningful supply disruptions. The Citi Eurozone Economic Surprise Index is falling another -3.3 points today to -38.0 points, which is the lowest since mid-Nov. of last year. The recent intensification of the downturn in Eurozone economies raises the odds of further sovereign/bank downgrades. The 10Y T-Note continues to trade too well and the euro currency is close to a technical breakdown from its recent range.
In general, US stocks remain extraordinarily resilient as aggressive dip-buyers once again materialized into an opening swoon. Banks are helping to propel the major averages off the morning lows on the beliefs that a major US housing recovery is underway and that they are mostly insulated from Europe’s woes. I find these views highly suspect and still believe that banks will underperform from current levels through year-end.
I continue to believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. The results of Europe’s weekend elections make another intense bout of European debt crisis fears more likely and make the eventual “solution” even more problematic over the intermediate-term, in my opinion. As well, given the upcoming US “fiscal cliff” and intensely negative political rhetoric that will surround the election, more equity investor caution is warranted into the second half of the year. 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, a US "fiscal cliff" solution 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, more shorting, profit-taking and less tech sector optimism.
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