North American Investment Grade CDS Index 87.16 -.99%
European Financial Sector CDS Index 154.43 bps +11.30%
Western Europe Sovereign Debt CDS Index 186.67 bps +2.19%
Emerging Market CDS Index 209.10 bps -2.52%
2-Year Swap Spread 24.0 unch.
TED Spread 20.0 +2 bps
Economic Gauges:
3-Month T-Bill Yield .10% -3 bps
Yield Curve 271.0 -10 bps
China Import Iron Ore Spot $169.10/Metric Tonne +.18%
Citi US Economic Surprise Index +17.80 +3.5 points
10-Year TIPS Spread 2.28% -3 bps
Overseas Futures:
Nikkei Futures: Indicating +22 open in Japan
DAX Futures: Indicating +36 open in Germany
Portfolio:
Higher: On gains in my Tech, Ag, Biotech and Medical long positions
Disclosed Trades: None
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite recent stock gains, rising eurozone sovereign debt angst and weakness in some overseas equity markets. On the positive side, Education, Homebuilding, Biotech, Medical, Bank, Software and Paper shares are especially strong, rising more than 1.0%. Cyclicals are outperforming. (XLF)/(IYR) have also outperformed throughout the day. Lumber is rising another +2.64% and copper is rebounding +1.25%. The 10-year yield is falling another -10 bps despite positive Leading Indicators data. The US Muni cds index is falling -3.50% to 205.90 bps. On the negative side, Oil Tanker, Internet, Telecom, Drug, Hospital and Road & Rail shares are under mild pressure. The Transports are relatively weak today and "value" shares are significantly underperforming "growth" stocks. Singapore Electronics Exports rose +10.8% during November, which was the slowest growth since November 2009. The Greece sovereign cds is climbing +2.87% to 985.33 bps, the Portugal sovereign CDS is rising +2.58% to 463.38 bps, the Belgium sovereign cds is increasing +2.07% to 211.25 bps, the Spain sovereign cds is climbing +2.41% to 331.86 bps and the Ireland sovereign cds is jumping 2.10% to 571.50 bps. The Euro Financial Sector CDS Index is breaking out to the highest level since June and the Emerging Markets sovereign cds index is rising +2.92% to 194.91 bps, which is also a big negative. Short/intermediate-term gauges of investor sentiment remain overly bullish. Spain's IBEX 35 continues to display technical weakness, falling another -1.1% today. US stocks remain extremely resilient, which is a large positive. If the S&P 500 can convincingly break above recent highs I will cover some of my hedges. I expect US stocks to trade modestly lower into the close from current levels on China inflation worries, profit-taking, more shorting and rising eurozone debt fears.
Irish Bonds Drop, German Bunds Gain After Moody's Slashes Ireland's Credit. Irish government bonds declined and German bunds rose as Moody’s Investors Service cut Ireland’s credit rating, renewing concern that Europe will struggle to stem the debt crisis and boosting demand for the safest assets. The yield difference, or spread, between Irish securities and German bunds widened even as European Union leaders agreed on a mechanism to contain debt shocks and the European Central Bank said it will raise capital. Moody’s lowered Ireland five levels to Baa1 from Aa2 and may cut the rating further as the nation struggles to contain bank losses. Portugal’s bonds also slid on speculation it could be the next country to seek aid. “The size of the downgrade is somewhat worrisome,” said Christopher Rieger, a fixed-income strategist at Commerzbank AG in Frankfurt. Irish debt’s “investor base looks at risk of eroding further, with market participants becoming uneasy.” The yield on Irish 10-year bonds rose 22 basis points to 8.64 percent as of 3:40 p.m. in London. The yield on Portuguese 10-year bonds increased two basis points to 6.58 percent.
Sovereign Swaps Jump as Irish Downgrade Fuels Contagion Concern. Ireland led an increase in the cost of insuring European government bonds after the nation’s credit rating was cut five levels by Moody’s Investors Service on concern it will struggle to contain bank losses and cut debt. Credit-default swaps on Ireland rose 16 basis points to 576, according to data provider CMA, the highest since Nov. 30. Confidence in the region’s banks was also hurt, with the subordinated Markit iTraxx Financial Index soaring 32.5 basis points to 328, the highest level since April 2009, JPMorgan Chase & Co. prices show. Ratings of Europe’s deficit-ridden peripheral nations are under pressure with Moody’s saying this week it may cut Spain and Greece, which already has a junk grade. The ratings firm also said yesterday it may downgrade the subordinated debt of 24 German banks because a new law gives the government the right to impose losses on bondholders. Credit-default swaps on Belgium increased 6 basis points to 202, Spain rose 6 basis points to 332, Portugal increased 11 to 467, Greece climbed 12 to 965 and Italy was 2 higher at 204, CMA prices show. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 6 basis points to 194. Markit Group Ltd.’s financial index of swaps on the senior debt of 25 European banks and insurers increased 9 basis points to 174.5, JPMorgan prices show. Swaps on the senior debt of Allied Irish Banks Plc increased 4.6 percentage points to 24.5 percent upfront and five percent a year, meaning it costs 2.45 million euros ($3.3 million) in advance and 500,000 euros annually to insure 10 million euros of debt for five years. Contracts on the senior debt of Banco Santander SA rose 11 basis points to 238 and subordinated swaps jumped 22 basis points to 412, CMA prices show. The cost of protecting corporate debt was little changed, with the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings up 3 basis points at 449.5 and the Markit iTraxx Europe Index of 125 companies with investment- grade ratings 1.25 higher at 106, according to JPMorgan.
Stock Picker Vinik Turns to Index Funds After Beating Market. Jeffrey N. Vinik, the hedge-fund manager whose stock selections have beaten markets for the better part of two decades, has invested almost half of his U.S. equity portfolio in passive index funds. Of the $3.39 billion in equities Vinik oversaw as of Sept. 30, about 48 percent was comprised of exchange-traded funds that track industries and global markets, according to a November regulatory filing. His Boston-based firm held more shares than any other hedge fund in 11 of the 13 ETFs he owned, according to data compiled by Bloomberg.
The Baltic Dry Index, a measure of raw materials-shipping costs, slid below 2,000 points in London for the first time since August because of a surplus of panamax-class vessels competing for cargoes. The gauge slid 1.4% to 1,999 points, for a ninth consecutive retreat. The last time the overall index traded below 2,000 points was Aug. 5.
Bank of Montreal to Buy Marshall & Ilsley(MI) for $4.1 Billion. Bank of Montreal, Canada’s fourth- biggest bank by assets, agreed to buy Wisconsin’s Marshall & Ilsley Corp. for $4.1 billion to expand in the U.S. The deal values Marshall & Ilsley at $7.75 a share, compared with yesterday’s closing price of $5.79 on the New York Stock Exchange, Toronto-based BMO said today in a statement.
Bullish Options Bets on U.S. Financial Stocks Jump to Highest in 13 Months. U.S. options traders are making the most bullish wagers on banks in more than a year, speculating financial companies will rally as the economy improves and analysts predict 21 percent profit growth next year. The ratio of outstanding calls to buy the Financial Select Sector SPDR Fund versus puts to sell rose by a third since October to 1.04 and reached 1.15 on Dec. 6, a 13-month high. The fastest-growing bet is that the ETF tracking 81 lenders and brokers including JPMorgan Chase & Co. and Bank of America Corp. will jump 29 percent to $20 by June. “People in the options market are betting heavily that these stocks will go up,” said Chris Rich, head options strategist at JonesTrading Institutional Services LLC in Chicago. “I’m seeing a lot of smart-money guys buying out-of- the-money calls in banks. When I see everyone marching in the same direction at the same time, that’s something I take note of. It’s a strong signal.”
Spain's Banks to Face More Pain in 2011 as Funding Costs Squeeze Revenue. Spain’s banks, burdened this year by rising defaults and flagging credit demand, will face further pressure in 2011 as funding costs eat away at the returns on their stock of home loans. The squeeze may be worst for lenders with the greatest proportion of mortgages because they have less scope to pass on the financing costs to customers, said Claire Kane, an analyst at MF Global in London. Ibercaja, a Zaragoza-based savings bank, has 53 percent of its loans in mortgages, while Bankinter SA, based in Madrid, has 46 percent, Bank of Spain data show. “The amount of mortgages a bank has gives an indication of who is going to face the most pressure on revenues,” said Daragh Quinn, an analyst at Nomura International in Madrid. “The more retail mortgages you have, the more difficult it will be to re-price your loan book.”
Obama Seeks to Make Amends With Unions Over Tax Deal. President Barack Obama today will meet with union leaders to try to heal a relationship strained by his agreement to extend Bush-era tax cuts. Behind the scenes, the White House is waging a broader campaign among Democratic Party loyalists to undo damage over the deal. The administration is making an “all hands on deck” effort to contact party activists angry over the accord, Jared Bernstein, Vice President Joseph Biden’s chief economic adviser, said before the U.S. House last night passed the $858 billion bill. Bernstein has made phone calls and held meetings with activists to defend a deal with Republicans that continues tax reductions for all Americans, including top earners.
InterMune Doubles After European Panel Backs Esbriet Respiratory Drug. InterMune Inc. doubled in Nasdaq Stock Market trading after a European regulatory committee recommended approval of its medicine Esbriet to treat a fatal lung disease. InterMune surged $16.99 to $31.26 at 11 a.m. New York time. Earlier, and climbed as high as $34.20, its biggest increase since the Brisbane, California-based company first sold shares in March 2000.
IMF Cuts Irish GDP Growth Forecast to .9% From 2.3% on Financial Crisis. The International Monetary Fund cut its forecast for Ireland’s economic growth today in a report that called for the country to reduce its budget deficit and overhaul its banking sector to recover from financial crisis. The Washington-based fund said it expects Ireland’s economy to grow 0.9 percent in 2011, down from 2.3 percent estimated by the fund in October.
Rupert Murdoch's "Daily" iPad Newspaper Set for January Launch. Want to get a gander at “the Daily,” Rupert Murdoch’s much-discussed but still sorta-secret iPad newspaper? Wait a month. News Corp. plans to launch the publication the week of January 17, multiple sources tell me.
North Korea Threatens More Attacks. North Korea warned Friday that it would attack South Korea more violently than it did last month if Seoul proceeds with plans to test-fire artillery from the island Pyongyang shelled. The statement raises the stakes on what was already seen as a risky test of the fortitude of both Koreas to dispute the inter-Korean maritime border.
Unemployment Rises in 21 States, Showing Weak Job Market. The unemployment rate rose in 21 states and Washington D.C. in November, up from the 14 states that showed increases the month before, according to government data released Friday.
MarketWatch:
Riders of the Spanish Storm. A small importer struggles to survive amid the economic crisis.The phones rang early on Jan. 20, 2009. The callers were two key suppliers for machinery importer Drilco SA, and they weren’t dialing in with good wishes for the new year. Instead, they were reacting to news that Standard & Poor’s had cut Spain’s sovereign credit rating to AA-plus from AAA. S&P was the first of the three big rating agencies to strip the country of that elite status, and board member Paloma Bellido, whose parents started Drilco in 1981, said the suppliers demanded new terms because of the downgrade.
China Leader Says Anti-Inflation Measures Needed. One of China’s top leaders said at a government meeting that measures needed to be taken to tamp down inflation in the coming year, according to a report on Friday by Xinhua, the state news agency. The comments were one of the clearest signs yet that Chinese leaders are increasingly concerned about popular resentment arising as a result of soaring living costs.
Washington Post:
Senator Hutchison Moves to Block Funds for FCC on Net Neutrality Rules. Sen. Kay Bailey Hutchison (R-Tex.), ranking member of the Commerce, Science and Transportation Committee filed an amendment to an appropriations bill aimed at preventing the Federal Communications Commission from adopting net neutrality regulation. Hutchison's amendment, co-signed by John Ensign (R-Nev.) and six other Republican lawmakers, would "prohibit the FCC from using any appropriated funds to adopt, implement or otherwise litigate any network neutrality based rules, protocols or standards."
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -19 (see trends).
Politico:
Democrat Seeks to Force Climate Rule Vote. Sen. John Rockefeller (D-W.Va.) is pressing forward on his drive to vote this month on his plan to delay Obama administration climate regulations for two years, threatening to go directly to the Senate floor and force a vote to include it in a catch-all spending bill. Rockefeller has told Senate leadership “that he will insist on a vote” on his measure to block the Environmental Protection Agency global warming rules set to take effect next month.
Reuters:
SEC Sends More Subpoenas in Mortgage Probe: Sources. U.S. regulators have opened a new line of inquiry in their mortgage foreclosure probe and are asking big Wall Street banks about the beginning stages of mortgage securitization, two sources familiar with the probe said. The Securities and Exchange Commission launched the new phase of its investigation by sending out a fresh round of subpoenas last week to big banks like Bank of America Corp(BAC), Citigroup Inc(C), JPMorgan Chase & Co(JPM), Goldman Sachs Group Inc(GS) and Wells Fargo & Co(WFC), the sources said. The SEC's subpoenas focus on the earliest stage of the mortgage securitization process, said the sources, who requested anonymity because the probe is not public.
Arizona Sues Bank of America(BAC) on Mortgage Servicing. The state of Arizona has sued Bank of America Corp, alleging the lender consistently misled consumers about its home loan modification process, a source familiar with the situation said. The lawsuit, filed by Arizona Attorney General Terry Goddard's office on Friday in state court, accuses Bank of America of violating a 2009 consent judgment in which it committed to widespread loan modifications, according to a draft copy of the complaint obtained by Reuters.
Comcast(CMCSA)-NBCU Deal Would Create Minority Networks. Comcast Corp (CMCSA.O) will offer new programming targeted at African and Asian Americans if it is allowed to buy a majority stake in General Electric Co's (GE.N) NBC Universal, the company announced this week in agreements with civil rights groups. The decision to boost diversity efforts comes as the company awaits approval from the U.S. Justice Department and Federal Communications Commission to complete a proposed merger that would create a combined broadcast, cable, movie studio and theme parks business. Comcast said in agreements filed with the FCC that it would add four new cable networks either owned or partly owned by African-Americans within eight years. It would also expand an existing channel carrying Asian-American programming to more markets, or create a new English-language channel that caters to Asian-American interests. In a letter to the FCC, the Reverend Al Sharpton and other civil rights leaders said the joint venture between Comcast and NBCU would spur diversity "by increasing the participation of minorities in its news and public affairs programming and enhancing opportunities for minorities within its writing staff."
Nobel Peace Prize winner Liu Xiaobo's wife, Liu Xia, is under house arrest with no telephone access, citing the Information Center for Human Rights and Democracy. Liu's family members are banned from visiting the prison where the Chinese writer is held, citing the Human rights group.
EU Agrees to Create Post-2013 Crisis Tool as Bloc Spars Over Current Steps. European Union leaders agreed to amend the bloc’s treaties to create a permanent crisis- management mechanism in 2013, while divisions flared over steps to prevent concern over debts from engulfing Portugal and Spain. Germany, the biggest contributor to Europe’s bailouts of Greece and Ireland, pushed through an accord to set up a system that would allow financial aid “if indispensable” to underpin the euro and might force bondholders to bear some of the costs of future rescues. “Our task now is to hold the course, walk not talk, and prove those wrong who predicted the demise of our common currency,” European Commission President Jose Barroso told reporters after the first session of an EU summit in Brussels late yesterday. The summit is slated to end around 1 p.m. today.
Portugal May Get Frozen Out by Bond-Sale 'Avalanche' in 2011: Euro Credit. Portugal risks being frozen out of the bond markets next year amid a wave of auctions from higher- rated governments and agencies that threaten to force the nation into seeking a bailout to pay its debts. “It has become the market consensus that Portugal’s ability to fund on a standalone basis is fairly constrained,” said Jamie Stuttard, head of European and U.K. fixed income at London-based Schroders Plc, which has $286 billion under management. “People have investment alternatives.”
Democrats Pull 'Omnibus' Budget Bill Amid Republican Opposition. The Senate’s top Democrat said he won’t try to pass a $1.2 trillion “omnibus” spending bill for the government loaded with thousands of lawmakers’ pet projects because Republicans withdrew their support for the measure. Senate Majority Leader Harry Reid, a Nevada Democrat, said tonight lawmakers will instead approve a stopgap funding measure of an as yet undetermined length. A so-called continuing resolution currently funding the government expires Dec. 18.
Mexico Drug War Death Toll Climbs to 30,196 Since 2006, Government Says. Mexican Attorney General Arturo Chavez said that 30,196 people have been killed in drug-related violence nationwide since President Felipe Calderon took office four years ago. The number of deaths from January to November this year was 12,456, Chavez said today in Mexico City.
Google(GOOG) Aims Twins Daggers at Microsoft's(MSFT) Heart: Tech by Rich Jaroslovsky. Forget about Google Inc.’s struggle with Facebook for eyeballs and programmers. Pay no attention to its fight with Apple Inc. over smartphones, or to any other tech rivalry. The search giant’s war with Microsoft Corp. is The Big One, the confrontation that will determine what kind of future Microsoft has, and maybe if it even has a future. And the two new weapons Google unsheathed last week carry an unmistakable message of mortal peril.
Kynikos's Chanos Says China Real Estate Boom Goes 'Unabated'. China’s property boom hasn’t slowed even after the government announced policy tightening measures, Jim Chanos, founder of Kynikos Associates LP, said today. The real estate market has picked up, said Chanos in an interview with Carol Massar and Matt Miller on Bloomberg Television’s Street Smart program. Millions of Chinese apartments have gone empty, he said. China is “on a treadmill to hell,” Chanos said in the interview, repeating his view in January.
U.S. Weighs Curbs on Biocrops. The U.S. Department of Agriculture is considering imposing restrictions for the first time on where and how a genetically modified crop may be grown, in a move that could eventually affect a wide swath of the farm industry.
California Asks Bond Underwriters To Detail Credit Default Swap Activity. Bill Lockyer, California's state treasurer, has amended a quarterly questionnaire for all 86 of the state's bond underwriters, forcing them to disclose what credit default swaps they have traded on the state's bonds, either for customers or for their own accounts. The disclosure forms could be sent to underwriters as soon as this week.
California's Housing Market Slows in November. The median home price falls 2.3% from a year earlier to $255,000. Statewide sales decline 3.9% from October and 12.4% from November 2009. California's housing market slowed in November, with both sales and prices falling. Some economists predict further declines next year if more foreclosures hit the market and the job engine remains sluggish. That year-over-year drop was the second consecutive decline in the median price after 11 months of improvement.
Institutional Investor:
Medallion Poised For One of Its 'Worst' Years.Jim Simons’ Medallion Fund is poised to post one of its worst years in its 23-year history. However, this just underscores how astoundingly the fund has performed over the years. Through November, Medallion, which for years has only been open to partners, employees and friends, is said to be up around 25 percent or so, net of its 5 percent management fee and 44 percent performance fee, according to knowledgeable sources. However, it could actually be a little higher than this. At the very least, this works out to around 50 percent gross, which would still make it one of the year’s best performing hedge funds again. However, Medallion's net return has ranged between 40.5 percent and 84.1 percent in each of the past four years. Incredible.
Reuters:
China Property Tightening Effective: Vanke. Beijing's measures to cool "ridiculous" property prices have made some progress, but the risks of a bubble mean the tightening campaign is unlikely to ease up in the year ahead, the chairman of China's largest property developer said. Skyrocketing property prices in China's top cities have stocked public discontent, prompting the government to step in. China risked a Japanese-style real estate bubble if the government doesn't control what Wang described as ridiculous property price moves in its top-tier cities such as Beijing and Shanghai. "It could be really, really bad without the government stepping in," said the soft-spoken Wang, who was dressed in a minimalist style, with an open-collared white shirt and black jacket. "If the bubble bursts, Japan's past will be China's present."Although Wang worries about the risks of a bubble in China's property sector, he brushed aside talk that the country may end up worse than Dubai where a property price bubble imploded during the global financial crisis after years of heedless expansion. Among the loudest critics, legendary short-seller Jim Chanos has said he is shorting China because he expects the economy to implode in a real estate bust. China is "on an economic treadmill to hell" and the country's real estate-fueled bubble is "Dubai times 1,000," said Chanos. "It's not comparable. These are very different markets," said Wang, referring to Chanos' Dubai analogy.
Goldman(GS) Seeks to Expand Wealth Arm By a Third. Goldman Sachs Group Inc (GS) on Thursday said it is expanding its wealth management business worldwide and intends to boost its ranks of advisers by a third over the next few years.
The U.K., France and Germany are in talks aimed at freezing the European Union budget until 2020. While German Chancellor Angela Merkel and French President Nicolas Sarkozy support the letter, they want to keep it secret to avoid diplomatic problems with other EU countries.
Cost of Insuring Against Ireland Default Rises.THE cost of insuring Irish bank bonds against default increased after legislators approved a burden-sharing bill analysts said was harsher than expected. The new law compels junior bondholders to share the cost of rescuing lenders after the Government was forced to accept a €85 billion aid package. The Credit Institutions (Stablisation) Bill 2010, gives the finance minister the power to change bondholders’ rights, including interest and principal payments, as well as impose debt-for-equity swaps and asset transfers. It’s "a harsh bill," Eleonore Lamberty, an analyst at ING Bank in Amsterdam, wrote in a client note. The measure "will intensify the burden-sharing fear and will cause further pressure on subordinated bonds of pan-European banks which have received state aid," she wrote.
21st Century Business Herald:
Shanghai may impose a property tax on areas of new homes that exceed 200 square meters.
China aims to cut energy consumption per unit of gross domestic product by 16% in five years by 2015, citing people helping draft the five-year energy-reduction targets starting from 2011.
Evening Recommendations Citigroup:
Reiterated Buy on (ABC), target $38.
Rated (ACOM) Buy, target $40.
Needham:
Rated (JNPR) Buy, target $42.
Night Trading
Asian equity indices are -.25% to +.50% on average.
Asia Ex-Japan Investment Grade CDS Index 104.0 -1.0 basis point.
Leading Indicators for November are estimated to rise +1.1% versus a +.5% gain in October.
Upcoming Splits
(AME) 3-for-2
Other Potential Market Movers
None of note
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 88.03 bps +2.08%
European Financial Sector CDS Index 146.11 bps +7.77%
Western Europe Sovereign Debt CDS Index 182.67 bps +.92%
Emerging Market CDS Index 215.43 bps +.57%
2-Year Swap Spread 24.0 -1 bp
TED Spread 18.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .13% unch.
Yield Curve 281.0 -4 bps
China Import Iron Ore Spot $168.80/Metric Tonne +.18%
Citi US Economic Surprise Index +17.80 +3.5 points
10-Year TIPS Spread 2.31% -1 bp
Overseas Futures:
Nikkei Futures: Indicating +79 open in Japan
DAX Futures: Indicating +3 open in Germany
Portfolio:
Higher: On gains in my Tech, Retail, Ag, Biotech and Medical long positions
Disclosed Trades: None
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades higher despite recent stock gains, rising eurozone sovereign debt angst, weakness in some key overseas markets and a plunge in (MA)/(V) shares. On the positive side, Gaming, Retail, Construction, Hospital, Biotech, Medical and Networking shares are especially strong, rising more than 1.0%. Healthcare-related stocks continue to trade very well. Lumber is rising another +1.97%. The -8 basis point decline in the 10-year yield in spite of today's mostly strong economic data may indicate yields are getting close to a tradable top. Gold is -.8% lower on the day. On the negative side, Homebuilding, Bank and Paper shares are lower on the day. (XLF)/(IYR) have underperformed again throughout the day. Copper is falling -.79%. Shanghai copper inventories are jumping another +5.61% and have risen +28.11% over the last 5 days. The Greece sovereign cds is climbing +4.49% to 973.55 bps, the Portugal sovereign CDS is rising +2.5% to 449.54 bps, the Italy sovereign cds is gaining +2.3% to 201.69 bps, the Belgium sovereign cds is increasing +2.36% to 207.06 bps and the Ireland sovereign cds is jumping 3.81% to 561.08 bps. The ongoing surge in the Euro Financial Sector CDS Index remains a big negative. Short/intermediate-term gauges of investor sentiment remain overly bullish, which is also a big negative. The AAII % Bulls fell to 50.23 this week, while the % Bears rose to 27.15. The Hang Seng Index and Spain's IBEX 35 continue to display technical weakness. US stocks remain extremely resilient, which is a large positive. If the S&P 500 can convincingly break above recent highs I will cover some of my hedges. I expect US stocks to trade modestly lower into the close from current levels on China inflation worries, profit-taking, more shorting and rising eurozone debt fears.
