Stocks Slightly Lower into Final Hour on Eurozone Debt Angst, Rising Global Growth Fears, US Fiscal Cliff Concerns, High Food/Energy Prices

Broad Market Tone:

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

Equity Investor Angst:

• VIX 14.02 -4.88%
  
• ISE Sentiment Index 106.0 +9.28%
  
• Total Put/Call .75 -25.0%
  
• NYSE Arms 1.03 +53.96%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 102.63 bps +.20%
  
• European Financial Sector CDS Index 247.52 bps +.16%
  
• Western Europe Sovereign Debt CDS Index 247.38 +.05%
  
• Emerging Market CDS Index 249.11 -.30%
  
• 2-Year Swap Spread 20.0 -.5 basis point
  
• TED Spread 34.25 +.25 basis points
  
• 3-Month EUR/USD Cross-Currency Basis Swap -36.75 +.75 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .09% -1 basis point
  
• Yield Curve 139.0 unch.
  
• China Import Iron Ore Spot $112.9/Metric Tonne -.79%
  
• Citi US Economic Surprise Index -19.70 +1.2 points
  
• 10-Year TIPS Spread 2.25 -1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating +15 open in Japan
• DAX Futures: Indicating +17 open in Germany
  

Portfolio:

• Higher: On gains in my Medical and Tech sector longs, emerging markets shorts and index hedges
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short, then covered some of them
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 bounces off morning lows despite eurozone debt angst, high food/energy prices, US "fiscal cliff" worries, earnings concerns and rising global growth fears. On the positive side, Internet, Oil Tanker, Airline and Paper shares are higher on the day. Lumber is gaining +1.45%, Oil is falling -.7%, Gold is down -.62% and the UBS-Bloomberg Ag Spot Index is falling -1.9%. The Germany sovereign cds is falling -1.1% to 64.81 bps. On the negative side, Coal, Alt Energy, Energy Oil Service, Steel, Semi, Networking, HMO and Gaming shares are especially weak, falling more than -1.0%. Small-caps are underperforming. Copper is falling -1.2%. Major Asian indices were mostly lower overnight, led down by a -1.5% decline in China. Chinese stocks continue to sit out the global equity rally off the June lows, which remains a big red flag. Major European indices are mixed as a +.3% gain in Spain is being offset by a -.5% decline in German shares. The Bloomberg European Bank/Financial Services Index is falling -.1%. Brazilian equities are falling -.1%. The France sovereign cds is gaining +.93% to 148.0 bps, the Portugal sovereign cds is gaining +1.2% to 776.85 bps, the UK sovereign cds is rising +2.1% to 57.50 bps, the China sovereign cds is gaining +.65% to 105.75 bps, the Russia sovereign cds is jumping +1.5% to 173.53 bps(+10.0% in 5 days) and the Israel sovereign cds is surging +6.4% to 150.03 bps. Moreover, the Emerging Markets Sovereign CDS Index is gaining +1.3% to 245.31 bps(+8.0% in 5 days). The UBS/Bloomberg Ag Spot Index is up +23.1% since 6/1. The benchmark China Iron/Ore Spot Index is down -37.6% since 9/7/11. Moreover, the China Hot Rolled Steel Sheet Spot Index is also picking up downside steam. As well, despite their recent bounces off the lows, the euro, copper and lumber all continue to trade poorly given equity investor perceptions that global central bank stimuli will boost economic growth in the near future. US weekly retail sales have decelerated to a sluggish rate at +2.0%. US Trucking Traffic continues to soften. Lumber is -8.0% since its Sept. 9th high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has declined for 4 straight weeks and has been around the same level since May 2010 despite investor perceptions of a big improvement in the nationwide housing market. The Baltic Dry Index has plunged around -65.0% from its Oct. 14th high and is now down around -55.0% ytd. Shanghai Copper Inventories have risen +71.0% ytd. Oil tanker rates have plunged recently, with the benchmark Middle East-to-US voyage down to 22.50 industry-standard worldscale points, which is the lowest since May, 2009. The CRB Commodities Index is now down -19.3% since May 2nd of last year despite the recent surge in food/energy prices. The 10Y T-Note continues to trade too well, despite recent weakness. There still appears to be a fairly high level of complacency among US investors regarding the deteriorating macro backdrop. It remains unclear to me whether or not Germany will destroy its own balance sheet in an attempt to "save" the euro even as investors have been pricing this outcome into stocks. Focus Magazine reported over the weekend a recent poll by TNS Emnid found that 52% of Germans don’t want European countries to share debt even if the EU takes control over budgets of individual countries, while 31% were in favor of this. The Citi Eurozone Economic Surprise Index is at -69.60 points, which is near the lowest since mid-Sept. of last year. Massive tax hikes and spending cuts are still yet to hit in several key eurozone countries that are already in recession. A lack of competitiveness remains unaddressed. The Italian yield curve is flattening too much again, with the spread down -60.0 bps in 6 days to 2.41%. The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. Uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff" and the election outcome uncertainty will likely become more and more of a focus for investors as the year progresses. Little if anything being discussed by global central bankers will actually boost global economic growth in any meaningful way over the intermediate-term, in my opinion. The odds of imminent QE3, which were already lower than perceived in my opinion, are likely plummeting with the recent surge in stock prices, inflation expectations, worrisome food crisis headlines and less pessimistic US economic data. As well, as I have been saying for several weeks, a new massive China stimulus round isn’t as likely as perceived as worries over their real estate bubble and soaring food prices intensify. Thus, recent market p/e multiple expansion on global central bank stimulus hopes, is creating an unstable situation for equities, which could become a big problem this fall unless a significant macro catalyst materializes soon. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower food/energy prices, a US "fiscal cliff" solution and higher-quality stock market leadership. Apple(AAPL) is once again helping to boost the major averages off their morning lows on more iTV rumors and optimism over the new iPhone release. While Apple will likely consolidate this year’s gains awhile longer, I still expect the shares to outperform over the intermediate-term. Long AAPL. I expect US stocks to trade mixed-to-lower into the close from current levels on eurozone debt angst, profit-taking, more shorting, high food/energy prices, earnings worries, US "fiscal cliff" concerns and rising global growth fears.