North American Investment Grade CDS Index 88.01 bps -4.34%
European Financial Sector CDS Index 127.79 bps +1.95%
Western Europe Sovereign Debt CDS Index 180.50 bps -.55%
Emerging Market CDS Index 210.73 bps -.02%
2-Year Swap Spread 21.0 -2 bps
TED Spread 17.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .13% +1 bp
Yield Curve 262.0 +10 bps
China Import Iron Ore Spot $164.70/Metric Tonne -1.44%
Citi US Economic Surprise Index -14.10 -2.0 points
10-Year TIPS Spread 2.25% +6 bps
Overseas Futures:
Nikkei Futures: Indicating +64 open in Japan
DAX Futures: Indicating +8 open in Germany
Portfolio:
Higher: On gains in my Retail, Ag, 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 mildly bullish as the S&P 500 trades slightly higher despite soaring long-term rates, recent gains, China inflation worries and insider trading probe rumors. On the positive side, Restaurant, Hospital, Disk Drive, Software and Steel shares are especially strong, rising more than 1.0%. Cyclical and Small-Cap shares are outperforming again. Copper is rising +.76% and Lumber is gaining +.95% despite more euro weakness. Weekly retail sales rose +3.8% this week versus a +3.2% gain the prior week. This is the best showing since the first week of April. The Italy sovereign cds is falling -5.95% to 202.34 bps. Gold is falling -1.45%. On the negative side, Airline, Construction, Gold, Oil Service and Coal shares are under pressure, falling more than 1.0%. The Portugal sovereign cds is gaining +1.15% to 440.26 bps and the Belgium sovereign cds is climbing +4.0% to 195.30 bps. The US Muni CDS Index is rising +3.64% to 191.21 bps, as well. The 10-year yield is soaring +21 bps to 3.13%. Market leading stocks have mostly underperformed throughout the day. Some key investor sentiment gauges are getting a bit too bullish. The Fed's highly flawed QE2 program and more short-term US economic optimism, as a result of the tax policies, are fueling a huge surge in long-term interest rates, which could potentially derail the economy next year as oil and mortgage rates rise too much. I expect US stocks to trade mixed-to-lower into the close from current levels on soaring long-term rates, profit-taking, China inflation fears, insider trading probe rumors and technical selling.
Tax Cuts May Fuel Economy, Limit Need to Extend Fed Purchases. President Barack Obama’s agreement to extend Bush-era income-tax cuts may give U.S. economic growth a boost while reducing pressure on the Federal Reserve to prolong its $600 billion bond-purchase program. Obama’s deal with congressional Republicans may raise gross domestic product next year by as much as half a percentage point to about 3.1 percent, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Allen Sinai, chief global economist at Decision Economics in New York, also raised his growth forecast for next year by half a point, to a range of 2.75 percent to 3 percent. Stocks rallied after the agreement was announced, sending the Standard & Poor’s 500 Index to the highest level since the financial crisis in September 2008 on expectations that the extension of Bush-era tax rates, as well as reduction in payroll taxes, would spur the consumer spending that accounts for 70 percent of the world’s largest economy. “It bumps up consumer spending in the first half of next year,” Feroli said. “You’re going to have a pretty nice increase in disposable income.” Much of the increase would come from a 2 percent cut in payroll taxes -- which fund Social Security and Medicare -- that “we weren’t expecting,” he said. The payroll-tax cut would apply to all wage earners, an administration official told reporters on a conference call yesterday. That would be an $800 savings for individuals with an income of $40,000. Those who earn salaries of more than $106,800 would save a maximum of $2,136.
Credit-Default Swaps Tumble to One-Month Low on Obama Tax Cuts. The cost of protecting U.S. corporate bonds from default fell for a fifth day and to the lowest in a month after President Barack Obama agreed to extend tax cuts. “The market much prefers certainty to uncertainty,” Brian Yelvington, head of fixed-income research at Knight Libertas LLC in Greenwich, Connecticut wrote in an e-mailed note. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decreased 2.9 basis points to a mid-price of 87.7 basis points as of 8:22 a.m. in New York, according to index administrator Markit Group Ltd.
ECB Said to Be Buying Irish, Portuguese, Greek Government Securities Today. The European Central Bank bought Irish and Portuguese government bonds today, according to at least two people with knowledge of the transactions. Central banks were also buying Greek debt, said one of the people, who asked not to be identified because the deals are confidential. Irish 10-year bonds rose, sending the yield down nine basis points to 8.28 percent as of 12:27 p.m. in London.
Junk Bond Defaults Fell to 3.3% in November, to Drop Further, Moody's Says. The global speculative-grade default rate fell to a two-year low of 3.3 percent last month at Moody’s Investors Service, as junk-rated borrowers tapped the bond market at a record pace. The rate declined from 3.7 percent in October and 13.6 percent a year ago, Moody’s said in a report today. Defaults will fall to 2.9 percent by year-end and 1.8 percent by November 2011, according to the report. That compares with a forecast last month of 2.8 percent by year-end and 1.9 percent by October 2011.
Middle East Supertanker Excess Expands, Curbing Potential Rates Advance. A surplus of supertankers competing to collect 2 million-barrel cargoes of Middle East oil expanded, curbing the potential for rates to rally as Northern Hemisphere refineries seek more crude to meet winter demand. There are 23 percent more very large crude carriers, or VLCCs, for hire over the next four weeks than there are cargoes, according to the median estimate of six shipowners and brokers surveyed by Bloomberg News. The surplus was 18 percent for the past two weeks.
First Exchange-Traded Funds Backed by Industrial Metals Will Start Dec. 10. ETF Securities Ltd., whose managers started the world’s first gold-backed exchange-traded product, said it will list similar funds holding copper, nickel and tin on the London Stock Exchange on Dec. 10. Other ETPs backed by aluminum, lead and zinc will be introduced next year, the Jersey, Channel Islands-based company said in an e-mailed statement today. The first three funds will be denominated in dollars and carry a management expense ratio of 0.69 percent, it said. A seventh fund will track all six metals. “They give investors, for the first time, direct access to the physical metals market,” ETF Securities Chairman Graham Tuckwell said in the statement.
China, India, Brazil Push U.S. for Deeper Greenhouse Gas Cuts. China, India, Brazil and South Africa said the U.S. must pledge deeper cuts in greenhouse gas emissions to help make progress in United Nations climate talks, sharpening divisions between rich and poor countries on how to combat global warming. The four developing nations at the talks in Cancun, Mexico, also called on industrialized economies to provide more aid for countries seeking to clean up their energy industries, adding to demands that the U.S. and European Union said may wreck the meeting.
Iran Agrees to More Nuclear Talks, Won't Suspend Enrichment. Iran agreed to more talks on its nuclear program while saying it would “absolutely not” suspend uranium enrichment, marking the first time in a more than a year that diplomatic options for the dispute are being kept alive.
Onyx(ONXX) Drug Reduced Cancer in a Third of Patients With Myeloma in New Study. Onyx Pharmaceuticals Inc.’s experimental drug carfilzomib shrank the tumors of one-third of study patients with multiple myeloma, a deadly blood cancer. The company’s shares surged the most in four months in New York trading. The company rose $3.91, or 13 percent, to $33.25 in Nasdaq Stock Market trading at 9:44 a.m.
Christie Says Goal Is To Erase New Jersey Budget Gap by End of First Term. New Jersey Governor Chris Christie said his goal is to erase the state’s chronic budget deficits by the end of his first term. Christie, a Republican who took office in January, spoke to Bloomberg News after a speech to business leaders in Newark that was closed to the press.
Tax-Cut Extension Will Fuel U.S. Growth, Pimco's El-Erian Says: Tom Keene. Pacific Investment Management Co.’s Mohamed El-Erian said that the U.S. tax agreement worked out by the Obama administration is good for growth as reflected in gains in stocks and commodities and declines in bonds. “It puts pressure on the fiscal situation so bonds are selling off,” El-Erian, chief executive and co-chief investment officer of the firm that runs the world’s biggest bond fund, said in an interview on “Bloomberg Surveillance” with Tom Keene. “It is very important that the market is interpreting it as good for growth, so risk assets are rallying across the board.”
18 Countries Join China in Nobel Boycott. China and 18 other countries have declined to attend this year's Nobel Peace Prize ceremony honoring imprisoned Chinese dissident Liu Xiaobo, Nobel officials said Tuesday. China has unleashed a new barrage deriding the decision, with Chinese officials in Beijing called Liu's backers "clowns" in an anti-Chinese farce — comments that came only three days before the Dec. 10 Nobel peace prize ceremony in Oslo. Beijing considers Liu's recognition an attack on China's political and legal system, and says the country's policies will not be swayed by outside forces in what it calls "flagrant interference in China's sovereignty."
Julian Assange Denied Bail After Arrest. WikiLeaks founder Julian Assange was denied bail at a court hearing following his arrest in the U.K. early Tuesday on an international warrant related to sexual-assault allegations in Sweden.
CNBC:
Job Openings Rise Sharply to a Two Year High. Employers posted a sharp increase in job openings in October, raising hopes that hiring could pick up in the coming months. Businesses and government advertised nearly 3.4 million jobs at the end of October, up about 12 percent from the previous month, the Labor Department said Tuesday.
Payroll Tax Cut Signals Big Obama Shift to Supply Side. Wall Street cheered President Obama’s fiscal compromise with Republicans, not just the extension of the existing Bush-era tax cuts, but the addition of a payroll tax cut in particular as that measure may signal an even bigger shift on the part of the White House toward supply-side economics.
Banks May Face Rating Cuts, Analyst Says. One of Wall Street’s most influential securities analysts is telling investors to brace themselves: some of the nation’s biggest banks could be on the cusp of a credit rating downgrade. In a new report, Glenn Schorr, who covers brokerage firms and banks at Nomura, says that while “it’s not a done deal, at present, Bank of America(BAC), Citigroup(C) and Morgan Stanley(MS) appear most at risk of being downgraded to Tier 2 status.”
Apple(AAPL) Struggles to Meet iPhone 4, iPad, MacBook Air Demand in China. Apple's hottest products are facing significant demand in China, with the 11-inch MacBook Air, certain versions of the iPad, and the iPhone 4 all facing shortages. Analyst Brian White with Ticonderoga Securities is continuing his tour of the Far East, and on Monday provided investors an update on his second day in China. Though he noted the iPad and 11-inch MacBook Air, in particular he found the iPhone 4 to be Apple's most difficult product to purchase. He said wait times are around two months and carrier China Unicom is unable to fulfill about a third of preorders. "Most of the carriers agree that the high-end smartphone opportunity in China is approximately 100-125 million subscribers, which we view as the addressable market for the iPhone," White wrote.
Real Clear Politics:
Will the Next President & Congress Rescue Us From ObamaCare? Paul Krugman, Nobel Prize winner in economics and an influential New York Times columnist, also has a blog, "The Conscience of a Liberal." On ABC's This Week (Nov. 14), during a discussion on balancing the federal budget against alarming deficits, he proclaimed the way to solve this problem is through deeply cost-effective health care rationing. "Some years down the pike," he said, "we're going to get the real solution, which is going to be a combination of death panels and sales taxes." That would mean the U.S. Debt Reduction Commission "should have endorsed the panel that was part of the [Obama] health care reform."
Politico:
Democratic Leaders Rip Tax Deal. Democratic leaders in the House are openly rebelling against President Barack Obama’s deal with Republicans on the Bush-era tax cuts — further isolating the president from Democrats who carried his agenda for the first two years of his presidency. House Majority Leader Steny Hoyer (D-Md.) said Tuesday that Democrats didn’t reach a deal with the White House, adding that his party believes it is “not appropriate” to extend tax cuts for upper-income Americans “when the deficit is at unacceptable levels.” “There was, at that point in time, no consensus or agreement reached by the House leadership,” Hoyer said. “There was a discussion it took some time, but there was no agreement reached.”
AP:
More Auto Loans Going to Subprime Buyers. Consumers with less than stellar credit are getting car loans again as lenders loosen their standards, and the trend is likely to continue as more lenders get into the business. The percentage of loans going to subprime buyers rose 8 percent in the third quarter, their first year-over-year increase since 2007, according to a report issued Tuesday by Experian, a credit reporting agency. For new cars, the percentage of loans going to subprime buyers rose 13 percent over the July-September period in 2009. The increase for used cars was 3 percent.
European Union Rules Out Immediate Aid Boost, Banks on ECB to Fight Crisis. European finance ministers ruled out immediate aid for Portugal and Spain or an increase in the 750 billion-euro ($1 trillion) crisis fund, counting on European Central Bank bond purchases to calm debt-spooked markets. A week after handing Ireland an 85 billion-euro lifeline, the finance chiefs voiced confidence that Spain and Portugal will tame their budget deficits and said the existing credit line is enough to defend them in an emergency. “It’s very difficult to calm the financial markets, but we repeated today one more time that we do everything to secure the financial stability in the euro zone,” Luxembourg Prime Minister Jean-Claude Juncker told Bloomberg News late yesterday after chairing the ministers’ meeting in Brussels.
ECB's Wellink Says 'It's Not Up To' Central Bank to Save Euro-Area Nations. European Central Bank Governing Council member Nout Wellink said it is not the central bank’s task to rescue euro-area countries with funding problems. “It’s not up to the ECB to save countries where governments run the risk of becoming insolvent,” Wellink, who also heads the Dutch central bank, said at a panel discussion in Amsterdam today. “We are not here to take over, on our balance sheet, the risks of the national economies of Europe.”
Ireland's Lenihan to Present Budget as 'Political Risk' on Bailout Mounts. Irish Finance Minister Brian Lenihan will outline 6 billion euros ($8 billion) worth of spending cuts and tax increases today, seeking to seal an international bailout to rescue the state’s finances and banks. Lenihan will lay out the 2011 budget in parliament in Dublin at 3:45 p.m., adding to measures of about 14 billion euros over the last two years.
Buyout Bets Wane as Swaps Show Economy Keeps LBOs in Check: Credit Markets. Buyout speculation that sent credit derivatives on companies from Cardinal Health Inc. to Dell Inc. soaring two months ago is waning as rising unemployment keeps the takeover revival in check. The average cost of credit-default swapson 15 companies including the Dublin, Ohio-based drug distributor and the computer maker founded by Michael Dell has dropped 33 basis points to 148 basis points, compared with a decline of 2.5 basis point for a benchmark swaps index. Swaps on Cardinal Health have plunged to 60 basis points from as high as 148.3 on Oct. 25. Bets on a surge in leveraged buyouts are being foiled as the sluggish recovery limits private-equity and bank deals. While the LBO pace has more than tripled to $133 billion this year from 2009, that compares with the record $1.6 trillion in announced deals from 2005 to 2007, according to data compiled by Bloomberg.
China Outstrips Fed With Liquidity Risking 2011 Inflation Spike. China’s reluctance to allow a stronger exchange rate has hamstrung its efforts to rein in inflation and endangered a campaign to shift the economy toward domestic demand. The central bank continues to add liquidity, with money supply rising 19 percent in November from a year ago, according to the median estimate of 29 analysts in a Bloomberg News survey before a government release this month. That needs to be curbed to 15 percent to 16 percent to rein in inflation, said Fred Hu, the former Goldman Sachs Group Inc. chief China economist who has founded financial advisory firm Primavera Capital Group. China has held off executing a series of interest-rate increases in part because that would put pressure on a currency officials have kept down to shelter exports. The strategy will leave inflation accelerating past 4 percent for 2011, a three- year high, according to a separate survey. The cost: diminished consumer spending and narrower margins for domestic industries. “China is behind the curve” on reining in the monetary measures adopted during the global financial crisis, said Hu, 47, who is based in Beijing and gives talks to Communist Party members on the economy. “Policy makers have been complacent and failed to anticipate the inflationary consequences of the massive stimulus program.”
Citigroup(C) to Shed Government 'Handcuffs' as Treasury Starts Selling Stake. Citigroup Inc., recipient of a $45 billion taxpayer-funded bailout in 2008, came a step closer to severing government ties as the U.S. Treasury Department began selling its remaining stake in the third-biggest U.S. bank. The 2.4 billion Citigroup shares, valued at $10.7 billion at yesterday’s closing price of $4.45 each, may be sold as early as today, according to Bloomberg data. Morgan Stanley, which since April has sold 5.3 billion Citigroup shares on behalf of the government in open-market sales, will underwrite the offering, the Treasury Department said yesterday in a statement.
Obama Brings CEOs to White House Huddle as 44th President Changes Himself. The president who promised change for a country that was brought to the brink of depression is seeking advice from business leaders two years later for what may be his own makeover as he tries to find jobs for 15 million unemployed Americans.
Wall Street Journal:
Deal Struck on Tax Package. Grand Bargain Includes One-Year Drop in Wage Levy, Estate Tax of 35%. President Barack Obama reached agreement Monday with Republican leaders in Congress on a broad tax package that would extend the Bush-era income tax cuts for two years, reduce worker payroll taxes for one year and give more favorable treatment to business investments. Other elements of the deal include a temporary reinstatement of the estate tax at 35%—the level favored by most Republican lawmakers—as well as an extension of jobless benefits for the long-term unemployed.
Merger of Bookstore Giants Is Pushed. A major shareholder of Borders Group Inc. proposed that the bookseller acquire much bigger rival Barnes & Noble Inc., in a gamble to unite the two giant but struggling retailers at a time of major tumult in the book industry.
China's Bright Food Nears Purchase of GNC. China's Bright Food Group Co. is close to a deal to buy U.S. vitamin retail chain GNC Holdings Inc. for between $2.5 billion to $3 billion, people familiar with the matter said, the latest sign of growing Chinese appetite for U.S. companies. A deal for Pittsburgh-based GNC, which is owned by Ares Management and the Ontario Teachers' Pension Plan Board, could be announced in the next few days, the people added.
Spill Panel Accuses Varco of Hindering Inquiry. The top lawyer for the presidential panel investigating the BP PLC oil spill has accused a Houston-based, oilfield-services firm of hindering the panel's inquiry by refusing to turn over software that could be used to determine what crew members on the doomed Deepwater Horizon rig were seeing on their computer screens the night of the deadly blast.
Chrysler Financial Bidding Begins. Two banking giants are in negotiations to purchase Chrysler Financial Corp., the auto lender owned by Cerberus Capital Management LP, according a person close to the matter. A deal valued at several billion dollars could be reached in the next few weeks, though there is no assurance the talks will lead to a sale.
U.S. Steps Up Push on Korea Crisis. In a Phone Call, Obama Urges China's Hu to Rein In Ally; Clinton Rules Out Talks With North Until Provocations Stop. President Barack Obama and China's President Hu Jintao spoke about the continuing crisis on the Korean peninsula, with the Chinese leader calling for calm and Mr. Obama urging Beijing to rein in its neighbor and ally.
Schwarzenegger Declares Fiscal Emergency in California. Governor Arnold Schwarzenegger declared a fiscal emergency in California today and called the legislature into a special session to address the state’s budget deficit. Schwarzenegger also presented a package of solutions, worth a total $9.9 billion, to help solve it. These include program reductions, alternate funding solutions and shifting funds. Among the governor’s proposals is a plan to lower the deficit by $6.2 million in 2010-11 and $25 million in 2011-12 by increasing monthly health care premiums in families with incomes from 150% to 250% of the federal poverty level.
Watch as David Einhorn Makes a Mockery of One-Man Fed "Expert Network" Larry Meyer. (video) One of the Fed's more arrogant former apparatchiks (of the "100% confidence" interval) Larry Meyer, currently at expert network Macroeconomic Advisors which is used by the likes of Pimco to get inside information on what the Fed will do at its upcoming meetings, appeared on CNBC earlier and attempted to school David Einhorn on "Economics 101."
CNN Money:
The 'Tax' You Can't Avoid: Oil Prices Rising. The price of crude is perilously close to $90 a barrel and the average cost for a gallon of gas is inching toward $3 nationwide. If they keep climbing, that could put a serious dent in economic recovery hopes for 2011. A spike in oil and gas prices is often referred to as a tax on consumers. That's because people have little choice but to suck it up and pay higher prices. As a result, consumers may spend less on other things that are not considered as vital. Part of the problem is that the Federal Reserve may be fueling (pardon the pun) the rise in oil with its controversial plan to buy $600 billion in long-term Treasury bonds. Fed critics argue that this quantitative easing program, the second since the onset of the financial crisis two years ago, may weaken the dollar further and lead to higher commodity prices.
LA Times:
Near Death, Elizabeth Edwards Quits Cancer Treatment. Elizabeth Edwards, the political wife whose name was hurled into the gossip scene when it was revealed her husband had had a love child with another woman, has only a few days to a few weeks to live, according to a friend of the family.
Politico:
Dems Aim For 100+ Bills in 1 Swoop. Democratic efforts to push through more than 100 public lands and water bills in the lame duck session are reaching a fever pitch, with the recognition this is the last chance many of them have to become law. Senate Majority Leader Harry Reid (D-Nev.) has tasked Democratic leaders on at least three committees to come up with a list of bills that could get past a GOP filibuster.
Reuters:
US Jobs Outlook Improves, Europe's Worsens - Manpower. Job seekers in the United States face better prospects in the coming quarter compared with three months ago, but the hiring outlook has worsened in much of Europe, notably in countries like Ireland and Spain where debt problems have eroded employer confidence. Of 36 countries and territories included in Manpower Inc's quarterly poll of hiring intentions, 15 showed improved job prospects for the first quarter, four were unchanged and 17 showed weaker hiring plans than three months ago.
Congress Likely to Cut US Ethanol Aid, Not End It. Congress is likely to extend the major U.S. ethanol incentive, rather than let it expire at the end of the month, but it will cut the tax credit by 20 percent or so, an analyst and an industry spokesman said on Monday.
Telegraph:
Euro Collapse 'Possible' Amid Deepening Divisions Over Bail-Out. Under questioning from MPs on the Treasury Select Committee, Stephen Nickell, a member of the Office for Budget Responsibility (OBR) and a former Bank of England rate-setter, said a collapse of the single currency was "a possibility".
The Guardian:
Greece seeks longer to repay €110bn IMF bailout loan as austerity bites. IMF team flies in to Athens amid fears over economic recovery and reforms as EU predicts public debt at 160% of GDP by 2013. Like some visiting potentate, the head of the International Monetary Fund, Dominique Strauss-Kahn, will be given a red carpet welcome when he visits Greece tomorrow but the pomp and circumstance will not be able to hide lingering fears over the debt-choked country's economic future.
China Daily:
China's inflation cycle is at a "critical point," requiring "disciplined and comprehensive policies," citing Stephen Roach, non-executive Asia chairman at Morgan Stanley. The Asia nation needs to convince the market that its shift to a "prudent" monetary policy "has teeth" by adopting tougher anti-inflationary measures, Roach said.
China Securities Journal:
The period around this weekend may be a "window" for China to raise interest rates, citing analysts at domestic banks and brokerages. The central bank may raise rates around the time set for the release of November's inflation data, which has been scheduled for Dec. 13, citing Li Huiyong, an analyst at Shenyin & Wanquo Securities, who forecast consumer prices may rise 6.1% last month. Lu Zhengwei, an economist at Industrial Bank Co., sees a rate increase as being likely between today and Dec. 18.
Financial News:
China should avoid breaking asset bubbles as it may lead to a "hard landing" for the country's economy, citing Liu Yuhui, a researcher with the Chinese Academy of Social Sciences.
Evening Recommendations Morgan Stanley:
Reiterated Overweight on (GOOG), added to Best Ideas List, boosted estimates, raised target to $730.
BMO Capital Markets:
Rated (GOOG) Outperform, target $700.
Night Trading
Asian equity indices are -.25% to +.50% on average.
Asia Ex-Japan Investment Grade CDS Index 107.50 +1.0 basis point.
Asia Pacific Sovereign CDS Index 107.75 +.25 basis point.
Consumer Credit for October is estimated at -$1.0B versus $2.1B in September.
Upcoming Splits
None of note
Other Potential Market Movers
The JOLTs Job Openings report for October, IBD/TIPP Economic Optimism Index for December, weekly retail sales reports, ABC Consumer Confidence reading, Goldman Sachs Financial Services Conference, CSFB Holiday Conference, UBS Media/Communications Conference, Morgan Stanley Clean Tech Conference, (LLL) investor conference, (MMM) analyst meeting, (ARM) analyst meeting, (RBC) analyst meeting, (CAH) analyst day, (NVLS) mid-quarter update, (SHOR) analyst meeting and the (TXN) mid-quarter update could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 92.0 bps -.90%
European Financial Sector CDS Index 135.27 bps +6.34%
Western Europe Sovereign Debt CDS Index 181.50 bps +2.25%
Emerging Market CDS Index 210.10 bps -.22%
2-Year Swap Spread 23.0 unch.
TED Spread 18.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .12% -1 bp
Yield Curve 252.0 -1 bp
China Import Iron Ore Spot $167.10/Metric Tonne -.42%
Citi US Economic Surprise Index -12.10 -2.5 points
10-Year TIPS Spread 2.19% -1 bp
Overseas Futures:
Nikkei Futures: Indicating +28 open in Japan
DAX Futures: Indicating +9 open in Germany
Portfolio:
Higher: On gains in my Retail, Ag and Technology long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite rising eurozone sovereign debt angst and recent equity gains. On the positive side, Education, Gaming, Internet, Steel, Gold, Alt Energy and Coal shares are especially strong, rising more than 1.0%. Cyclical and Small-Cap shares are outperforming again. Copper is rising slightly despite euro weakness. The 10-year yield is falling -7 bps to 2.94%. On the negative side, Disk Drive and Paper shares are under mild pressure, falling more than .75%. The Spain sovereign cds is rising +6.37% to 312.82 bps, the UK sovereign cds is jumping +6.3% to 71.76 bps, the China sovereign cds is climbing +4.24% to 73.43 bps and the Ireland sovereign cds is gaining +3.05% to 552.54 bps. Today's overall market action remains more positive than the major averages would suggest as stocks consolidate recent gains on light volume. I expect US stocks to trade mixed-to-higher into the close from current levels on seasonal strength, investment manager performance angst, diminishing economic fear, short-covering and less financial sector pessimism.
