North American Investment Grade CDS Index 93.72 bps +1.97%
European Financial Sector CDS Index 144.37 bps +21.36%
Western Europe Sovereign Debt CDS Index 174.0 bps +3.37%
Emerging Market CDS Index 228.47 bps +3.78%
2-Year Swap Spread 19.0 +1 bp
TED Spread 16.0 unch.
Economic Gauges:
3-Month T-Bill Yield .12% unch.
Yield Curve 231.0 -2 bps
China Import Iron Ore Spot $164.90/Metric Tonne +.30%
Citi US Economic Surprise Index +30.40 +.7 point
10-Year TIPS Spread 2.10% -3 basis points
Overseas Futures:
Nikkei Futures: Indicating -250 open in Japan
DAX Futures: Indicating +27 open in Germany
Portfolio:
Lower: On losses in my Medical, Biotech and Technology long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
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 on China inflation concerns, rising Korean Peninsula tensions and increasing euro sovereign debt angst. On the positive side, Retail, REIT, Telecom and Defense shares are holding up relatively well, falling less than 1.0%. Small-cap shares are outperforming again. The 10-year yield is falling -5 bps to 2.75%. The S&P GSCI Ag Spot Index is rising +.79%. Weekly retail sales rose +2.6% this week versus a +2.7% gain the prior week. On the negative side, Homebuilding, Coal, Gaming, Oil Tanker, Paper, Oil Service and Steel shares are under significant pressure, falling more than 2.5%. Copper is falling -1.4% and Gold is gaining +.68%. The Greece sovereign cds is gaining +2.86% to 1,047.47 bps, the Russia sovereign cds is rising +6.66% to 153.56 bps, the Hungary sovereign cds is gaining +4.24% to 320.48 bps, the Portugal sovereign cds is surging +6.14% to 481.11 bps, the Spain sovereign cds is climbing +6.45% to 300.42 bps, the UK sovereign cds is rising +4.97% to 65.65 bps and the Ireland sovereign cds is gaining +9.23% to 571.35 bps. The huge jump in the euro financial sector cds index remains very troubling. This index is now breaking out of the range it has been in since early July. Given the jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals, Korean peninsula tensions and financial sector Basel III concerns, the broad market is still holding up better than I would have expected, which is a big positive. Market leaders remain relatively firm. However, these concerns appear to be beginning to take their toll and further weakness could materialize tomorrow before the Thanksgiving holiday. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, seasonal strength and short-covering.
North Korea Attack on South Kills Two, Setting Homes Ablaze. North Korea lobbed artillery shells at a South Korean island near the disputed border between the two countries, killing two soldiers and setting houses ablaze in the worst attack on its neighbor in at least eight months. South Korea returned fire with 80 shells and scrambled fighter jets as President Lee Myung Bak vowed to respond “sternly.” Local television channel YTN showed smoke billowing from Yeonpyeong island off South Korea’s northwest coast and said residents took cover in bomb shelters.
Euro in 'Exceptionally Serious' Situation Amid Irish Bailout, Merkel Says. German Chancellor Angela Merkel said the euro is in an “exceptionally serious” situation after Ireland became the second European country to need a rescue after Greece. “I don’t want to paint a dramatic picture, but I just want to say that a year ago we couldn’t imagine the debate we had in the spring and the measures we had to take” over Greece, Merkel said in a speech to Germany’s BDA employers’ group in Berlin today. “We are facing an exceptionally serious situation as far as the euro’s situation is concerned.”
Ireland Said to Need 85 Billion Euros for Rescue. European Union officials estimate that a rescue package for Ireland may amount to about 85 billion euros ($114 billion), according to two officials familiar with the talks. The European Commission cited the figure as a preliminary estimate on a conference call of euro-region finance ministers on Nov. 21, said the people, who spoke on condition of anonymity because the talks were private. Of the total, 35 billion euros would be earmarked for banks and 50 billion euros to help finance the Irish government. Contagion is spreading through the euro region as Ireland hammers out an aid package with the EU and the International Monetary Fund to rescue its banking system. Spanish bonds tumbled, pushing the extra yield that investors demand to hold its 10-year debt over German bunds to a euro-era record of 236 basis points. Irish bonds also dropped today. “The markets currently have virtually zero confidence that the bailout in Ireland will solve the European crisis,” Charles Diebel and David Page, fixed-income strategists at Lloyds TSB Corporate Markets in London, wrote in a note today. “With markets effectively in a position to dictate policy, the risk is that the credibility crisis shifts to more sizeable EU countries and thereby poses a greater risk to the system as a whole.”
Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 18 basis points to 480, according to JPMorgan Chase & Co. at 3 p.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 4 basis points to 107 basis points, JPMorgan prices show. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers increased 12.5 basis points to 152 and the subordinated index rose 23 to 260.5.
Payrolls Grow as Employers Gain Confidence in Recovery. Payrolls increased in 41 U.S. states in October, led by Texas and New York, indicating the labor market is stabilizing across the world’s largest economy. Employers in Texas added 47,900 jobs last month, figures from the Labor Department showed today in Washington.
Japan Consumer Lending Falls by Record. Japan’s consumer loans fell by a record in September because of tougher regulations that took effect in June, the Nikkei newspaper reported. The revision of the money-lending business law cut rates and limited loans to one-third of a borrower’s annual income, according to the Nikkei. Consumer loans at Japan’s 62 moneylenders declined by 47 percent to 263 billion yen ($3.2 billion) in September from a year earlier, according to the website of the Japan Financial Services Association, which didn’t provide a reason for the decrease.
Obama's Administration Buys One in Four Hybrids as Consumer Market Slumps. President Barack Obama’s administration has bought almost a fourth of the Ford Motor Co. and General Motors Co. hybrid vehicles sold since he took office, accelerating federal purchases as consumer demand wanes. The U.S. General Services Administration, which runs the government fleet, bought at least 14,584 hybrid vehicles in the past two fiscal years, or about 10 percent of 145,473 vehicles the agency purchased in that period, according to sales data obtained by Bloomberg under a Freedom of Information Act request.
Christie's Job-Approval Rating Survives New Jersey Budget Cuts, Poll Shows. New Jersey Governor Chris Christie still wins approval from almost half of the state’s voters even as he cuts budgets, according to a Fairleigh Dickinson University poll. Christie’s job performance was supported by 49 percent of registered voters surveyed by the university’s PublicMind Poll, compared with 39 percent who disapprove, the school said today.
Gilead(GILD) Pill Helps Prevent HIV in 'Breakthrough' Study. A daily pill helped protect gay and bisexual men from HIV for the first time in a landmark study.Gilead Sciences Inc.’s Truvada, sold to subdue the AIDS- causing virus in those already infected, cut the risk of contracting HIV by 44 percent, according to findings published today in the New England Journal of Medicine. The drug reduced new infections as much as 73 percent in those who used it most.
10 Held in 3 Countries in Belgian Terror Probe. Ten suspects were detained in Belgium, the Netherlands and Germany following an investigation of a possible terror attack in Belgium by an international group of jihad fighters, prosecutors said. The detainees have Belgian, Dutch, Moroccan and Russian nationalities and will appear before an investigating judge later today, the Belgian federal prosecutor’s office said in a statement. The suspected terror group was predominantly based in the Belgian city of Antwerp, the prosecutors said.
Wall Street Journal:
Massey(MEE) Energy Moves Close to Sale. Massey Energy Co.'s board on Monday took another step toward a potential sale of the company, setting up a committee to explore offers.
CNBC:
US Growth Revised Up More Than Expected to 2.5%. The U.S. economy grew faster than previously estimated in the third quarter, government data showed on Tuesday, but still not enough to address stubbornly high unemployment. Gross domestic product growth was revised up to an annualized rate of 2.5 percent from 2.0 percent as exports, and consumer and government spending were stronger than initially thought, the Commerce Department said in its second estimate.
High-Frequency, Prop Traders on Bharara's Radar. Computer-driven trading shops and independent proprietary trading firms may be the next to feel the heat from watchdogs aiming to clean up Wall Street, source tell The Post. Federal agents, who have ratcheted up the heat on insider-trading rings linked to hedge funds and investment firms, are also are targeting firms that purport to offer individual investors specialty trading techniques employed by Wall Street powerhouses like Goldman Sachs, these sources said. These firms, which claim to offer market access that typical investors aren't privy to, are being eyed because they may be helping bad actors conduct flash trades that could be tied to insider-trading activity, sources said.
Retrained for Green Jobs, But Still Waiting on Work. After losing his way in the old economy, Laurance Anton tried to assure his place in the new one by signing up for green jobs training earlier this year at his local community college. Anton has been out of work since 2008, when his job as a surveyor vanished with Florida's once-sizzling housing market. After a futile search, at age 56 he reluctantly returned to school to learn the kind of job skills the Obama administration is wagering will soon fuel an employment boom: solar installation, sustainable landscape design, recycling and green demolition. Anton said the classes, funded with a $2.9 million federal grant to Ocala's workforce development organization, have taught him a lot. He's learned how to apply Ohm's law, how to solder tiny components on circuit boards and how to disassemble rather than demolish a building. The only problem is that his new skills have not resulted in a single job offer. Officials who run Ocala's green jobs training program say the same is true for three-quarters of their first 100 graduates.
Politico:
Business: Barack Obama's Outreach Not Enough. After two years of building frustration, the executives say they won’t be won over by another round of private lunches and photo opportunities at the White House. If President Barack Obama has any hope for a truce with corporate America in time for his 2012 reelection campaign, he needs to drop the name-calling, try to see their point of view better and step up with some specific proposals.
USA Today:
Body Scanner Makers Doubled Lobbying Cash Over 5 Years. The companies with multimillion-dollar contracts to supply American airports with body-scanning machines more than doubled their spending on lobbying in the past five years and hired several high-profile former government officials to advance their causes in Washington, government records show. L-3 Communications, which has sold $39.7 million worth of the machines to the federal government, spent $4.3 million trying to influence Congress and federal agencies during the first nine months of this year, up from $2.1 million in 2005, lobbying data compiled by the Center for Responsive Politics show.
Reuters:
FBI Raids Send Warning to Hedge Funds. FBI raids on hedge funds were a sign that prosecutors feared evidence in a widening insider trading probe could be destroyed, but the dramatic daytime searches may also have been intended to shake up the secretive hedge fund world, legal experts said. Investigators most likely swooped down on the funds Monday in Connecticut and Massachusetts because they had a major concern that subpoenas for information would not be properly obeyed, lawyers and investigators said. The raids served another purpose: warning the broader financial industry that a serious prosecution effort was underway.
European Union and International Monetary Fund officials will tell the Greek government to step up the pace of deficit cuts and structural reforms as government efforts slow. EU and IMF officials will spell out changes which must be made by each ministry so that a fourth payment of loans under the 110 billion-euro package is made in February.
Xinhua:
China and North Korea signed a cooperation agreement on trade and economy in Pyongyang today.
Irish Rescue Plan Turns Focus to Southern Europe: Euro Credit. Ireland’s plan to seek a European rescue risks escalating, rather than alleviating, the sovereign debt crisis as investors turn their focus to the high budget- deficit nations of southern Europe. Ireland’s Nov. 21 decision to request emergency aid from the European Union and the International Monetary Fund did little to reverse the jump in borrowing costs. The extra yield investors demand to hold Spanish and Portuguese 10-year debt rather than German bunds rose yesterday. The spread between Spanish and Italian yields also widened, indicating investors see increasing threats for Spain compared with Italy. Even as EU leaders said Ireland’s bailout will stem contagion in the euro region, investors are turning their attention to Portugal, which hasn’t cut government spending and has barely grown for a decade. A rescue of Portugal may increase pressure on its high budget-deficit neighbor Spain, whose gross domestic product is almost twice the size of Portugal, Greece and Ireland combined. After Portugal “the next question would be Spain and then Italy and then France and then the EU,” said Antonio Garcia Pascual, chief southern European economist at Barclays Capital in London. “Spain is bit too big to be bailed out, the size of a rescue required would use up all the funds available and then you have Italy with contagion as well,” prompting “a situation where the euro itself is put into question.”
U.S. Commercial Property Prices Jump Most on Record. U.S. commercial property prices rose 4.3 percent in September from the previous month, the biggest gain in a decade of records, Moody’s Investors Service said. The Moody’s/REAL Commercial Property Price Index climbed 0.3 percent from a year earlier as a small number of high-priced deals drove up values, Moody’s said in a statement today. The measure had fallen to an eight-year low in August. “Each of the summer months this year recorded declines in the 3 percent to 4 percent range, followed by this month’s sizeable uptick,” Nick Levidy, a Moody’s managing director in New York, said in the statement. “The relatively large swings seen in the index recently are due in part to the uncertain macroeconomic environment and the effects of a thin market with low transaction volumes.”
Medtronic(MDT) to Buy Ardian for $800 Million to Gain Novel Hypertension Device. Medtronic Inc.,the world’s largest heart device maker, said it will acquire Ardian Inc., a closely held company developing a hypertension device that destroys nerves near the kidney, for $800 million. Medtronic, based in Minneapolis, said it will pay $800 million in cash plus milestones based on Ardian’s revenue through 2015. Medtronic already owns 11 percent of the Mountain View, California, device company.
China Inflation May Prove Too Hot for Controls Amid Cash Glut. Standing near his 12-table noodle shop on Beijing’s Yonghegong Avenue, owner Liu Heliang says meat and vegetable prices have climbed 10 percent in a year and staff wages are up 40 percent. “I’m struggling to make ends meet with costs going up like this,” said Liu, a native of Sichuan province who pays his workers as much as 1,800 yuan ($271) a month, or 88 percent more than the Beijing minimum wage, to serve up a staple Chinese meal. “Raising prices is the only way out,” he said, predicting he won’t be able to hold out beyond two months. “They are just not addressing the fundamental problem at all,” said Patrick Chovanec, an associate professor at Beijing’s Tsinghua University. With the expansion of credit and cash in the economy stemming from China’s response to the global crisis, “you’re sitting on a volcano,” said Chovanec.
China's State-Planned Economy is Doomed to Flop: David Pauly. The biggest obstacle to China becoming the world’s No. 1 economy is China. The communist nation’s determination to keep as tight a rein on its economy as it has on its citizens will lead to failure -- just as it has for other countries that embraced central planning schemes. China is reversing its flirtation with a type of quasi- capitalism that allowed entrepreneurs to thrive and propelled the economy forward at an annual rate of about 10 percent. The Chinese now follow the so-called Beijing consensus, a belief that concentrating more control of industry in government hands will avoid the financial debacles caused by free markets. The nation’s state-owned companies are buying up independent businesses in the auto, steel and energy industries. A government-run company even plans its own Internet search business to compete with Baidu Inc., whose shares trade on stock exchanges.
White House Loses Two Top Economic Advisors.Two more of the Obama administration's top economic advisers are departing, at a time when the White House is facing growing opposition to its economic policies on Capitol Hill. White House National Economic Committee Deputy Director Diana Farrell and Treasury Department Assistant Secretary for financial institutions Michael Barr are both planning to leave within weeks, people familiar with the matter said. Both played central roles in the Obama administration's response to the financial crisis, acting as lead architects of the financial regulation overhaul law that President Barack Obama signed into law in July.
Assembly Pushes to Oust Iran President. Iran's parliament revealed it planned to impeach President Mahmoud Ahmadinejad but refrained under orders from the Supreme Leader Ayatollah Ali Khamenei, exposing a deepening division within the Iranian regime. Lawmakers also launched a new petition to bring a debate on the president's impeachment, conservative newspapers reported Monday. The reports of impeachment efforts came as a retort to a powerful body of clerics that urged Mr. Khamenei to curb the parliament's authority and give greater clout to the president. In a report released Sunday and discussed in parliament Monday, four prominent lawmakers laid out the most extensive public criticism of Mr. Ahmadinejad to date.
With New Power, GOP Takes on Consumer Agency. Republican Reps. Spencer Bachus of Alabama, the leading contender to take the reins of the House Financial Services Committee, and Illinois Rep. Judy Biggert, the top Republican on the panel's oversight and investigations subcommittee, sent letters to the inspectors general of both the Treasury Department and the Federal Reserve, directing them to conduct an investigation into the work being done to establish the new bureau. The lawmakers wrote that the agency warrants "rigorous" oversight by the inspectors general because it will play a significant role in credit availability for consumers and small businesses. GOP lawmakers have also sent letters to regulators on the legal bills incurred by former executives of government-controlled mortgage finance giants Fannie Mae and Freddie Mac and the economic impact of the financial-overhaul rules being written by the Securities and Exchange Commission. The letters are the strongest signals yet of how the new House Republican majority plans to use its oversight powers to hobble elements of the Obama agenda.
CNBC:
Velma Hart, Who Questioned Obama's Policies, Loses Job. Velma Hart, who told President Obama she was "exhausted" of defending him and became the face of disappointed Americans this fall, has lost her job. In another casualty of a weak national economy, Ms. Hart learned late last week that she'd been laid off as chief financial officer of AmVets, a non-profit veterans service organization based outside of Washington, D.C.
It's Crazy How Inbred the Hedge Funds in This Huge Insider Trading Scandal Are. Everyone involved in the insider trading scandal that's blowing up the hedge fund world right now seems to have ties to each other - and to Steve Cohen's SAC Capital. Three funds were raided on Monday, and Charlie Gasparino says that up to twelve hedge funds will be named in the huge investigation, so we're anticipating that more will be raided in the days to come. What's happened, it seems, is that the government has discovered a huge "ring" of friends or acquaintances who all know each other. They seem to have found a number of witnesses, one of whom is Nicos Stephanou, who are aware of an advanced networking scheme that the feds suspect amounts to insider trading.
J.Crew(JCG) Nears a Sale to Chairman and Buyout Firms. J. Crew, the trendy clothier of choice for the likes of Michelle Obama, is near a deal to sell itself for about $2.8 billion to the buyout firms TPG Capital and Leonard Green & Partners, people with direct knowledge of the matter told DealBook on Monday. Under the terms of the proposed deal, TPG — a former owner of the retailer — and Leonard Green would work with the company’s chairman and chief executive, Millard S. Drexler, these people said. The buyout firms are expected to pay about $43.75 a share, a 16 percent premium to Monday’s closing price of $37.65.
Rasmussen Reports:
Two-Thirds Favor Cutting Federal Payroll by 10%. Sixty-six percent (66%) of voters nationwide favor a proposal to cut the federal payroll by 10% over the coming decade. A new Rasmussen Reports telephone survey found that just 22% are opposed and 12% are not sure.
Best Buy(BBY) Sees Better Black Friday Sales. U.S. consumer electronics chain Best Buy Co Incanticipates higher sales on "Black Friday," the kick-off to the all-important holiday selling season, a top executive said. The news boosted its shares by about 2 percent. "There is pent-up demand out there," Shari Ballard, executive vice president of Best Buy, told Reuters in an interview on Monday, adding that the retailer is planning for better holiday sales this year versus 2009. "We are actually enormously excited about the holidays," Ballard said, adding: "From a year perspective, it has been a little bit lumpy in terms of customer demand."
BP's(BP) $20 Billion Compensation Fund Should be Enough - FT. A $20 billion fund for the economic victims of the BP Plc Gulf oil spill should be enough to compensate those affected, the Financial Times reported, citing the lawyer administering claims. Fund administrator Kenneth Feinberg, appointed by the Obama administration to handle the compensation, told the newspaper he had paid $2 billion to 125,000 people, but had approved fewer than half of the claims made. "Based on what I've seen so far I'm cautiously optimistic that $20 billion is more than enough," the newspaper quoted Feinberg as saying.
Ireland Set for Nervy Two Weeks Until Budget Vote. Ireland begins two nervous weeks of political manoeuvring on Tuesday as the government dares the opposition to block an austerity budget on which a multi-billion euro EU/IMF bailout is riding. Irish Prime Minister Brian Cowen defied mounting pressure to quit on Monday, saying he would stay in office until parliament passed the budget, then call an early election.
Analog Devices(ADI) Sees Revenue Growth Resuming in Q2. Microchip maker Analog Devices Inc forecast a sequential revenue drop in the first quarter, but expects growth to resume in the second quarter on helped by the industrial segment. "Typically second quarter is very strong for us. Usually the industrial business has its strongest sequential improvement in the second quarter," Chief Financial Officer Dave Zinsner told Reuters. Analogue Devices expects its industrial segment -- the company's biggest unit -- to "grow nicely" in 2011 and beyond, driven by growth in the Asian markets.
Raided Hedge Funds Slammed by Departures, Outflows. The three hedge funds raided by U.S. authorities on Monday have faced investor outflows or seen some high profile staff departures in the past year.
U.S. Truck Tonnage Up .8% in October - ATA. An index that tracks the tonnage hauled by U.S. trucks rose in October, its second gain in two months and a sign of a strengthening economy. The American Trucking Association's advance seasonally adjusted For-Hire Truck Tonnage Index rose 0.8 percent in October, after rising a revised 1.8 percent in September. Year-on-year, tonnage hauled climbed a seasonally adjusted 6 percent, well above the 5.3 percent gain in September. October tonnage levels were the highest in three months, even after seasonal changes were accounted for, according to the ATA. "This is a pleasant surprise. It shows the economy has legs, even if it's not strong yet," said Bob Costello, ATA's chief economist.
China Business News:
Chinese banks still face "severe" risks because of the "difficult" global economic recovery and the "arduous" task of domestic structural adjustments, citing a circular that the China Banking Regulatory Commission issued to its local branches and banks.
Evening Recommendations Susquehanna:
Rated (TGT) Positive, target $67.
Rated (WMT) Positive, target $66.
Night Trading
Asian equity indices are -1.75% to -.50% on average.
Asia Ex-Japan Investment Grade CDS Index 103.50 +1.5 basis points.
Asia Pacific Sovereign CDS Index 99.50 -.75 basis point.
Preliminary 3Q GDP is estimated to rise +2.4% versus a prior estimate of a +2.0% gain.
Preliminary 3Q Personal Consumption is estimated to rise +2.5% versus a prior estimate of a +2.6% gain.
Preliminary 3Q GDP Price Index is estimated to rise +2.3% versus a prior estimate of a +2.3% increase.
Preliminary Core PCE is estimated to rise +.8% versus a prior estimate of a +.8% gain.
10:00 am EST
Existing Home Sales for October are estimated to fall to 4.48M versus 4.53M in September.
2:00 pm EST
Release of Nov.2-3 FOMC minutes.
Upcoming Splits
(MGA) 2-for-1
Other Potential Market Movers
The Treasury's Geithner speaking, $35 Billion 5-Year Treasury Notes Auction, Richmond Fed Manufacturing Index, weekly retail sales reports, weekly ABC consumer confidence report, (JEC) analyst day, (PRE) investor day and the (SLF) investor day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by real estate 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 91.91 bps +.98%
European Financial Sector CDS Index 131.33 bps +23.90%
Western Europe Sovereign Debt CDS Index 168.33 bps +3.27%
Emerging Market CDS Index 221.18 bps +1.16%
2-Year Swap Spread 18.0 +1 bp
TED Spread 16.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .12% -1 bp
Yield Curve 233.0 -4 bps
China Import Iron Ore Spot $164.40/Metric Tonne +.98%
Citi US Economic Surprise Index +29.70 unch.
10-Year TIPS Spread 2.13% unch.
Overseas Futures:
Nikkei Futures: Indicating -35 open in Japan
DAX Futures: Indicating +16 open in Germany
Portfolio:
Slightly Higher: On gains in my Retail, Biotech and Technology long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades just modestly lower despite China inflation concerns, rising financial sector pessimism and increasing euro sovereign debt angst. On the positive side, Gaming, HMO, Disk Drive and Gold shares are especially strong, rising more than 1.0%. Cyclical and small-cap shares are substantially outperforming. (IYR) is bucking (XLF) weakness. Tech shares have also been relatively strong throughout the day. The 10-year yield is falling -7 bps to 2.8%. On the negative side, Homebuilding, Bank, Road&Rail, I-Banking and Steel shares are under pressure, falling more than 1.0%. (XLF) has substantially underperformed throughout the day. Copper is falling -1.74% and Gold is gaining +.76%. The Greece sovereign cds is jumping +5.69% to 1,039.14 bps, the Portugal sovereign cds is surging +9.68% to 453.97 bps, the Spain sovereign cds is climbing +7.73% to 282.08 bps, the UK sovereign cds is rising +3.81% to 62.52 bps and the Ireland sovereign cds is gaining +3.29% to 522.29 bps. While the huge jump in the euro financial sector cds index is very troubling, it is still only at the upper end of the trading range it has been in since early July. Given the jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals and financial sector Basel III concerns, the broad market remains impressively resilient. Some market-leading growth stocks trade very well. As has been the case for most of the year, those companies that can post relatively strong earnings growth in most economic environments are seeing p/e multiple expansion and continue to hugely outperform the S&P 500. If the market can continue to consolidate recent gains in a healthy fashion during this period of heightened eurozone debt angst, any calming of fears should produce another upside surge in stocks. I expect US stocks to trade mixed-to-higher into the close from current levels on technical buying, short-covering, tech sector optimism, seasonal strength and bargain-hunting.
