North American Investment Grade CDS Index 92.50 bps +2.36%
European Financial Sector CDS Index 113.21 bps -2.41%
Western Europe Sovereign Debt CDS Index 170.33 bps -2.29%
Emerging Market CDS Index 204.18 bps +3.62%
2-Year Swap Spread 22.0 -8 bps
TED Spread 16.0 unch.
Economic Gauges:
3-Month T-Bill Yield .12% unch.
Yield Curve 226.0 +4 bps
China Import Iron Ore Spot $161.80/Metric Tonne +.50%
Citi US Economic Surprise Index +36.0 +.1 point
10-Year TIPS Spread 2.08% +6 bps
Overseas Futures:
Nikkei Futures: Indicating +35 open in Japan
DAX Futures: Indicating -9 open in Germany
Portfolio:
Lower: On losses in my Tech, Ag, Biotech and Medical long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short and took some profits in an Ag long
Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades meaningfully lower despite a bounce in the euro, a decline in sovereign debt angst and a better US Consumer Confidence reading. On the positive side, Semi, Airline and Networking shares are holding up well. The Spain sovereign cds is declining -3.9%, the Portugal sovereign cds is down -6.1% and the Ireland sovereign cds is down -7.45%. On the negative side, Coal, Alt Energy, Oil Service, Ag, Gold, Paper, Homebuilding and Gaming shares are under significant pressure, falling more than 2.50%. (XLF) has undperformed slightly. Small-cap and cyclical shares are underperforming, as well. Shanghai copper inventories are slightly higher again today. Copper is falling -3.51% and the S&P GSCI Ag Spot Index is plunging -5.74%. The China sovereign cds is jumping +5.3% and the Japan sovereign cds is gaining +4.5%. The Illinois and California municipal cds are up +3.04% and +3.0%, respectively. I suspect global equity investors are finally beginning to come to grips with some of the many negative consequences of the Fed's QE2 program. One such negative consequence is that the more quantitative easing the Fed does, the greater the odds of a hard-landing in China become as they hike rates to curtail their budding inflation problem. Moreover, long-term US interest rates are moving up too much as inflation expectations rise, which is defeating some of the main purpose of QE2. I expect US stocks to trade mixed-to-lower into the close from current levels on China hard-landing worries, more shorting, profit-taking, Eurozone debt worries and rising long-term rates.
Cowen Says Ireland 'Cooperating' With EU as Debt Crisis Threatens Region. Irish Prime Minister Brian Cowen said he is working with fellow European leaders as his nation’s sovereign debt crisis threatens the stability of European markets. While reiterating that his debt-strapped country has not sought to tap an EU rescue fund, Cowen told reporters today that “there are issues affecting the wider euro area of which we are a member” and that he and his counterparts were working to “ensure that the bond markets respond positively to the euro.” Irish bonds rose from a record low today, gaining for the first time in 14 days as traders bet a bailout was near. European governments sought to calm investor concerns, saying they won’t be forced to share the cost of a rescue.
Credit-Default Swaps Rise on Ireland Debt, China Rate Concerns. The cost of protecting bonds from default in the U.S. rose today as the index was poised for its biggest weekly gain since July. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 1.3 basis points today to a mid-price of 91.8 as of 8:27 a.m. in New York, according to index administrator Markit Group Ltd. The index, which typically rises as investor confidence deteriorates and falls as it improves, has increased 6.2 basis points this week amid concern over Ireland’s debt, the largest gain since the week ended July 2, Markit data show.
China Stocks Plunge Most Since August 2009 on Concern Over Rate Increase. China’s stocks tumbled the most since August 2009, as investors speculated policy makers may raise interest rates for the second time in two months as early as today to curb inflation. Bank of China Ltd. slid the most in five months and China Vanke Co., the nation’s largest developer, plunged more than 7 percent after a report yesterday showed consumer prices rose at the fastest pace in two years. Jiangxi Copper Co. and Aluminum Corp. of China Ltd. tumbled more than 8 percent as commodities futures plunged in China on concern that slowing economic growth may curtail demand. “We know there’ll be more tightening given how inflation has accelerated and home prices haven’t come down,” said Mark Tan, who helps oversee $12 billion at UOB Asset Management Ltd. The Shanghai Composite Index dropped 162.31, or 5.2 percent, to 2,985.44 at the close, the most since Aug. 31, 2009. The index slumped 6.7 percent that day, entering a so-called bear market on concern a slowdown in lending growth would derail a recovery in the economy. The CSI 300 Index dived 6.2 percent to 3,291.83 today. The MSCI Asia Pacific Index lost 1.5 percent, while copper prices fell by the daily limit in Shanghai.
China's Faster Inflation Fuels Speculation Rate-Rise Near. China’s central bank may raise interest rates within weeks after inflation accelerated to the fastest pace in 25 months in October, a Bloomberg News survey of economists showed. The benchmark one-year lending rate will rise to 5.81 percent by year-end from 5.56 percent, according to the median forecast of 11 analysts polled after yesterday’s price data. The deposit rate may climb to 2.75 percent from 2.5 percent, the survey showed.
Commodities Worldwide Slide on China Rate Rise Concern; Copper, Oil Drop. Commodities tumbled today, with copper falling from a record and oil slipping from a two-year high on speculation China may attempt to rein in inflation by raising interest rates, curbing demand in the biggest consumer of metals and energy. Cotton, zinc and soybeans also slid. Copper for three-month delivery on the London Metal Exchange fell as much as 2.9 percent to $8,575 a metric ton, and traded at $8,650 by 11:51 a.m. local time. The contract, which reached a record $8,966 a ton yesterday, is little changed this week. Oil futures fell $1.79, or 2 percent, and were set for a weekly drop of 1 percent. “Commodities have moved sharply into reverse as markets fear further tightening from China following yesterday’s elevated inflation print and expectation that inflation will continue to escalate,” Edel Tully, an analyst at UBS AG in London, said in a report. “There’s talk of an interest-rate hike over the weekend,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “It’s quite possible given how inflation has accelerated.” “The government already sold stockpiles of cotton, sugar, aluminum and zinc, and there’s speculation that it may do more to suppress prices and contain inflation,” BOC’s Tian said. “There’s also market speculation that the government may sell additional sugar stockpiles, as well as soybean stockpiles.”
The Baltic Dry Index, a measure of commodity-shipping costs, fell for a fourth week on an oversupply of vessels used to haul iron ore for making steel. The gauge slid 7.3% this week, the most in seven weeks. Today it lost 2.2%. Daily rents for capesize vessels that primarily haul iron ore fell 3.2% to $34,500, rounding out a weekly slide of 13%. "There's less activity in the Atlantic" and more ships are sailing empty before picking up cargoes in December, said Erik Nikolai, an Oslo-based analyst with Arctic Securities ASA.
India's Industrial Output Growth Unexpectedly Slows to Least in 16 Months. India’s industrial production growth unexpectedly slowed to a 16-month low in September, signaling consumer demand is waning after Asia’s fastest round of monetary policy tightening this year. Stocks and bond yields fell.Output at factories, utilities and mines rose 4.4 percent after a revised 6.9 percent increase in August, the statistics office said in a statement in New Delhi today. The median estimate of 27 economists in a Bloomberg News survey was for a 6.4 percent gain.
South Korean 'No Deal' May Damp U.S. Trade Accords Prospects. Before heading to Seoul, U.S. Trade Representative Ron Kirk was warned by Senator Max Baucus that “no deal is better than a bad deal” when it came to negotiating changes in a free-trade agreement with South Korea. The announcement by the U.S. and Korean presidents yesterday that they failed to agree on changes to beef and auto provisions may make “no deal” the reality for U.S. trade accords across Asia and the world. “It’s very disappointing: If they can’t deliver under these circumstances, you have to wonder,” former U.S. Trade Representative Susan Schwab said in a Bloomberg Radio interview yesterday. “If you can’t re-close a deal when both leaders say they want it done by a certain time, then you have got some serious problems.”
U.S. Postal Service Says Loss Widened to $8.5 Billion in 2010. The U.S. Postal Service said its loss widened to a record $8.5 billion in the year ended Sept. 30, exceeding its forecast, as the volume of mail declined. Revenue fell 1.5 percent to $67.1 billion for the year and mail volume dropped 3.5 percent, according to a presentation to the service’s board today at a meeting in Washington. The loss in the previous fiscal year was $3.8 billion, the service said. The Postal Service, which forecast a $7 billion loss, said almost two thirds of the deficit, or $5.5 billion, covered health-benefit costs for future retirees. An additional $2.5 billion covered adjustments to workers’ compensation liabilities for interest rate changes. The loss for 2011 will be $6.4 billion, Chief Financial Officer Joseph Corbett said today.
J&J(JNJ) Will Unveil New Drug Results. Johnson & Johnson sat out the blockbuster heart-drug era when cholesterol-lowering statins and blood-pressure pills fueled years of double-digit earnings growth in the pharmaceutical industry. Now, though, the company may be close to making a play in an emerging class of blood-thinning medicines that some analysts believe could become a $20 billion annual global market by the end of the decade.
Greece Plans New Austerity Measures. Greece is set to announce a new series of austerity measures next week as it scrambles to collect up to €4.5 billion ($6.15 billion) needed to meet its 2011 budget-deficit goal, two senior government officials said Friday. The extra measures will mostly focus on spending cuts in the public sector, but may also include more indirect taxes, the officials said.
Ireland: EU Aid Wouldn't Make Sense. Ireland's finance minister said Friday that the country hasn't applied for European financial aid, a step he said "doesn't to me make any sense." He also said that the government's austerity budget would be passed when it is presented in early December.
China's SAIC Finalizing Plans to Buy GM Stake. China's biggest auto maker is close to finalizing a plan to buy a stake in General Motors Co., which is preparing for an initial public offering next week, according to people familiar with the discussions. SAIC Motor Corp., which has built cars with GM in China since the 1990s, is among foreign entities who will become part-owners of GM when the auto maker returns to the public markets, these people said.
Top Earners May Face Big Hit. A presidential panel's draft overhaul of the tax system could hit higher earners hard, largely by wiping out deductions and investment breaks that tend to especially benefit those who make enough money to itemize their taxes.
A Quick Reminder of Why Commodity Prices Could Collapse In An Instant. (graph) What makes commodities particularly vulnerable right now is that net speculative long positions are near all-time highs right now across the board. That trade is very crowded, and thus revere-prone.
Foreclosure Mess Prompts Growing Number of Public Officials to Slow Down Process. One month ago, the city of Chicago and the surrounding suburbs of Cook County became a foreclosure-free zone. It wasn't the banks or judges that instituted the moratorium, because they were still moving cases forward at a rapid clip. The holdup was elsewhere: at the sheriff's office. Sheriff Thomas J. Dart, whose office is responsible for physically evicting delinquent homeowners, announced Oct. 19 that his deputies would "no longer be doing the banks' work for them anymore."
Reuters:
DR Horton(DHI) New Home Orders Fall More Than 20%. D.R. Horton Inc, the biggest U.S. homebuilder, said 2011 would be another tough year for its battered industry, with no hope for a boost from the spring selling season, sending its shares down as much as 5 percent. The company said it would sell fewer homes in 2011 than it did in 2010 as new home orders fell 20.5 percent to 3,979 homes in its fourth quarter.
Spain's Treasury has asked the European Commission for a six-month extension for banks to be able to sell bonds guaranteed by the Spanish state.
The Globe and Mail:
Speculators Driving Up Coffee Prices, Starbucks(SBUX) Laments. “It is quite unfortunate that we are witness to record-high coffee prices, the highest level in almost 15 years, and there is zero, let me repeat, zero shortage of coffee and there is no demand problem,” Mr. Schultz told the Reuters news agency. “The situation is, the financial speculators have driven the commodity market to record highs and coffee is one of them,” he said.
European Ministers Hold Ireland Debt Crisis Talks at G-20. Finance ministers from Germany, France and the U.K. met in Seoul to discuss Ireland’s debt crisis after bond yields soared on concern the European Union will need to step in with a bailout. Ministers are monitoring developments and will probably issue a joint statement later today, said Steffen Seibert, a spokesman for German Chancellor Angela Merkel.
Bernanke's Stimulus Plan Pummels Northrop(NOC), Wal-Mart(WMT) Bonds: Credit Markets. Federal Reserve Chairman Ben S. Bernanke’s latest plan to stimulate the U.S. economy is pummeling investors owning the longest-maturity corporate bonds. The price of 30-year debt from Northrop Grumman Corp., the largest U.S. Navy shipbuilder, has dropped 5.2 percent since Nov. 2, the day before the Fed’s announcement. Wal-Mart Stores Inc. bonds due in 2040 have slipped 3.8 percent in the period to about the lowest level since the Bentonville, Arkansas-based retailer sold the securities last month. U.S. corporate bonds due in 15 years or more have lost 2.5 percent since the Fed committed to buying $600 billion of Treasuries, compared with a decline of 0.4 percent for the investment-grade market overall, according to Bank of America Merrill Lynch index data. That signals investors believe the Fed will succeed in bolstering growth and avoiding deflation, leading to higher interest rates.
Spanish Bond Yields at Risk as Debt Contagion Gathers Force: Euro Credit. Spain’s efforts to cut the euro region’s third-biggest deficit may not avert record borrowing costs, as investors speculating on a bailout for Ireland or Portugal trash the bonds of Europe’s peripheral countries. The extra yield investors demand to hold Spanish 10-year bonds over German bunds jumped 25 basis points this week to 220, nearing June’s euro-era record of 232 basis points. The risk premiums for Ireland and Portugal soared to record highs of 647 and 460 basis points, respectively. Collapsing bond values make it harder for Ireland and Portugal to sell new debt, and leave Spain vulnerable to similar attacks, according to analysts including Phyllis Reed, head of bond research at Kleinwort Benson Private Bank in London. Shoring up the finances of an economy that is 12 percent of the euro region and more than three times Portugal and Ireland combined would strain the 750 billion-euro ($1 trillion) lifeline set up to stop contagion from Greece’s near default in May. “There’s a perception that once you start down the path with one country, the others have to follow, at least the market will interpret it that way,” said Reed. Investors “won’t be able to help themselves, whether it’s right or not,” she said.
ECB's Trichet is Bond Buyer of Only Resort as Euro's Debt Crisis Worsens. European Central Bank President Jean-Claude Trichet is the buyer of only resort as the euro area’s bond market melts down. Just six months after he threw out his rule book to prevent Greece’s debt crisis from splintering the euro area, the 67-year old Frenchman may again be the only policy maker able to prevent the collapse in Irish and Portuguese bonds from spreading. That may require him to ignore opposition from Bundesbank President Axel Weber to the ECB’s bond-buying program and expand purchases of sovereign assets, according to Citigroup Inc. and Royal Bank of Scotland Group Plc. The pressure on the Frankfurt-based ECB reflects its status as the only institution in the 27-nation European Union able to act fast enough to placate bondholders.
Cisco(CSCO) Options Trading Jumps to a Record on Bets the Shares Will Rebound. Cisco Systems Inc. option trading jumped to a record and was 19 times the four-week average on wagers that the world’s largest computer networking-equipment maker will rebound after the biggest drop since July 1994. Volume exceeded 1.58 million contracts as almost 1 million calls changed hands compared with 586,000 puts as of 4 p.m. in New York. The most-active contracts were November $21 calls, April $24 calls and April $18 puts.
Bank of America(BAC) Said to Sell BlackRock(BLK) Stake to Mizuho. Mizuho Financial Group Inc., Japan’s third-biggest bank, agreed to buy a 2 percent stake in BlackRock Inc. for $500 million, including shares sold by Bank of America Corp., according to two people briefed on the transaction.
China Commodity Futures Tumble on Tightening Concern as Inflation Jumps. China’s commodities futures tumbled today with cotton, sugar and rubber falling by the daily limits after gains to records were seen as excessive and on concern China may take additional measures to curb inflation, possibly reducing demand. Copper, zinc, soybeans and palm oil also slid. “The government already sold stockpiles of cotton, sugar, aluminum and zinc, and there’s speculation that it may do more to suppress prices and contain inflation,” Tian Feng, analyst at BOC International (China) Ltd., said by phone from Shanghai.
China Real-Estate Bubble Concern Fails to Deter Investors. Most global investors think China is experiencing a real estate bubble, even as they say the world’s fastest-growing major economy offers the best opportunity for making money over the next year. Two-thirds of the people surveyed in the latest Bloomberg Global Poll say a bubble is inflating property values in China, where the economy grew at a 9.6 percent annual rate in the third quarter. Still, when asked to identify one or two markets offering the best opportunities in the next year, 33 percent of investors cite China, more than any other country. Brazil ranks second at 31 percent, followed by India with 29 percent and the U.S. at 23 percent.
Wall Street Journal:
Watchdog Planned for Online Privacy. The Obama Administration is preparing a stepped-up approach to policing Internet privacy that calls for new laws and the creation of a new position to oversee the effort, according to people familiar with the situation. The strategy is expected to be unveiled in a report being issued by the U.S. Commerce Department in coming weeks, these people said. The report isn't yet final and could change, these people said.
'Mortality Swaps' Coming Alive. Fitch Issues Rating on Insurer's Death-Risk Transaction. Fitch Ratings issued the first public rating on a mortality swap transaction, potentially opening the floodgates for what is a relatively new area of the capital markets and one that isn't tied to conventional assets like stocks and bonds. The transaction in question helped an unidentified U.S. life insurer transfer the risk that several policyholders might die sooner than expected to institutional investors.
A Growth Agenda for the New Congress by Arthur Laffer. For now: Extend the Bush tax cuts, repeal ObamaCare, support free trade. After 2012: Enact a flat tax, stabilize prices, balance the budget, give politicians incentive pay.
CNBC:
Regional Bank Profits to Get Hit by New Regulations: Whitney. Regional banks are going to become less profitable because of tighter financial regulations and are likely to close thousands of bank branches to cut costs, analyst Meredith Whitney told CNBC.
Obama's Trade Strategy Runs into Stiff Resistance. President Obama’s hopes of emerging from his Asia trip with the twin victories of a free trade agreement with South Korea and a unified approach to spurring economic growth around the world ran into resistance on all fronts on Thursday, putting Mr. Obama at odds with his key allies and largest trading partners.
Quants and Morgan Stanley(MS) to Part. For nearly two decades, the mathematical whiz Peter Muller and his secretive band of traders have helped power Morgan Stanley to bigger profits. But now Morgan Stanley and Mr. Muller are in advanced talks about splitting up.
LA Times:
Audits of City Finances Ofter Cover Up Serious Problems. Accountants gave Bell clean reports, ignoring red flags that pointed to excessive salaries, illegal taxes and failure to follow reporting requirements. A Times review finds Bell is far from being alone.
Cattle Network:
Think $5 Corn is Expensive? Some Are Betting on $10 Next Year. The corn market’s rally above $5 a bushel this fall has stirred growing consternation among livestock producers and others dependent on the largest U.S. crop. As the global grain supply outlook tightens, some traders in Chicago are placing bets that prices may double next year. Over the past week, trading firms including JPMorgan Chase & Co. and MF Global Holdings Ltd. bought call option contracts that would pay off if corn rose above $10 or $11 a bushel next spring. “There’s real risk out there” for higher prices, Van said. He’s been trading in the corn options pit since the contract was launched in 1985 and said he’d never seen an $11 call traded until the past week. “Price rationing could take it up further. I would certainly think we’re headed higher.” Concern over tight supplies also spilled into the soybean market, where $20 call options traded over the past week, a premium of more than 50 percent over current futures prices. Consumers, who are already paying record supermarket prices for bacon, would face even higher meat costs as animal inventories decline, he said. “It’s kind of a chilling thought,” Meyer said today, referring to $10 corn. “You’re talking devastating kinds of costs” for livestock producers, he said. “You’d see liquidation on a massive scale in the pork industry, and in chicken, turkey and beef as well. It would decimate all of us.” As of the close of trading yesterday, there were 850 open contracts in March 2011 $10 corn call options and 1,286 positions in May 2011 $11 calls, according to CME reports. In soybean options, there were 1,686 positions open in March 2011 $20 calls.
NASDAQ:
California Teachers Pension Fund to Invest $150 Million in Commodities. The California State Teachers' Retirement System, one of the largest U.S. pension funds, said Wednesday it will likely invest up to $150 million in commodities as part of a new investment strategy. In September, staff at the fund, known as CalSTRS, proposed that the fund invest $2.5 billion in commodities to provide a hedge against inflation. At a meeting on Nov. 4, CalSTRS's investment committee agreed that the fund should make a foray into commodities, but dialed back the amount to $150 million. The committee concluded that the lower amount was more appropriate for what the committee considered to be innovative investments that potentially carry more risk than the funds' current investments, said Ricardo Duran, a CalSTRS spokesman.
Politico:
Democrats Angry Over Obama Tax Deal Talk. For almost a decade in Democratic politics, there was little disagreement: If you were running for office, you wanted do away with the Bush tax cuts for high-end earners. Now, in the eyes of liberal and moderate Democrats alike, President Barack Obama has blinked — even before the new House Republican majority takes office.
Reuters:
Nvidia(NVDA) Eyes Higher Sales, Talks Up Tegra. Graphics chipmaker Nvidia forecast higher sales for the current quarter and said its mobile business would take off next year when tablets and smartphones will use its Tegra chips. Nvidia's shares rose in after-hours trade after the company said its revenue in the fourth quarter would rise between 3 percent and 5 percent sequentially. Analyst on average had expected 2.6 percent growth, according to Thomson Reuters I/B/E/S.
Finisar(FNSR) Raises Q2 Revenue Outlook, Shares Up. n">Finisar Corp raised its second-quarter revenue outlook on higher demand for its network and telecom products, sending shares of the fiber optic components maker up about 14 percent after the bell.
Germany will present its proposal for a European crisis mechanism next week rather than next month to allay investor concerns that have driven up bond yields, citing the Finance Ministry. The plan, which will spell out to what extent bondholders would have to contribute to a sovereign bailout, could be presented at a meeting of European Union finance ministers next week rather than the EU summit in December.
RTHK:
Hong Kong Chief Executive Donald Tsang said the city's government will take measures to curb any risks of a property bubble developing as high capital inflows and low interest rates increase the likelihood of a bubble forming.
China Daily:
The U.S. decision to undertake a second round of so-called quantitative easing is "dangerous" and is a "beggar-my-neighbor" policy, Bank of China Ltd. Chairman Xiao Gang wrote. The result of quantitative easing in the U.S. is that the dollar has tumbled, inflation expectations have increased and asset and commodities prices have surged, Xiao wrote. The weakening of the dollar has hurt other economies, Xiao wrote.
Evening Recommendations
None of note
Night Trading
Asian equity indices are -1.50% to -.50% on average.
Asia Ex-Japan Investment Grade CDS Index 105.0 +4.0 basis points.
Asia Pacific Sovereign CDS Index 98.0 +1.0 basis point.
Preliminary Univ. of Mich. Consumer Confidence for November is estimated to rise to 69.0 versus a reading of 67.7 in October.
Upcoming Splits
(HCSG) 3-for-2
(WCN) 3-for-2
(RAI) 2-for-1
(AOS) 3-for-2
Other Potential Market Movers
The Fed's Tarulio speaking, Fed's Raskin speaking, CSFB Healthcare Conference and the BofA Merrill Energy Conference could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 90.37 bps -1.77%
European Financial Sector CDS Index 117.66 bps +4.89%
Western Europe Sovereign Debt CDS Index 174.33 bps +1.06%
Emerging Market CDS Index 204.18 bps unch.
2-Year Swap Spread 30.0 +8 bps
TED Spread 16.0 unch.
Economic Gauges:
3-Month T-Bill Yield .12% unch.
Yield Curve 222.0 -1 bp
China Import Iron Ore Spot $161.0/Metric Tonne +.44%
Citi US Economic Surprise Index +35.90 -.2 point
10-Year TIPS Spread 2.14% +3 bps
Overseas Futures:
Nikkei Futures: Indicating -16 open in Japan
DAX Futures: Indicating +23 open in Germany
Portfolio:
Slightly Lower: On losses in my Tech and Medical long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades well off session lows despite recent sharp equity gains, overseas equity weakness, tech sector earnings worries and rising euro sovereign debt angst. On the positive side, Airline, Gaming, Restaurant, Homebuilding, Construction, Hospital, Biotech, Gold, Oil Service, Energy, Oil Tanker and Coal shares are especially strong, rising more than .50%. Small-Cap and cyclical shares are outperforming. The Transportation Index is also slightly higher on the day. Copper is rising +1.55% despite euro weakness. Lumber is also rising +.69%. On the negative side, Networking, Semi, Computer, Internet and Defense shares are under pressure, falling more than 1.0%. Shanghai copper inventories are surging another +9.35% today and are now at the highest level since late May, rising +24.2% in 5 days. The Portugal sovereign cds is gaining +3.53% to 483.0 bps. The Emerging Markets Sovereign Debt CDS Index is jumping 9.7% to 199.25 bps. Moreover, other key global cds indices continue to surge higher, which is a large negative. As well, the 2-year Swap spread has broken out technically, which is also a negative. Stocks remain very resilient despite today headline losses as the bears remain unable to gain significant traction. An unusual number of stocks are gaining on good volume today given the losses in the major averages and overall stock/sector breadth isn't bad. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less economic fear, seasonal strength and technical buying.
