Stocks Surging into Final Hour on Less Eurozone Debt Angst, More Financial/Tech Sector Optimism, Diminished Global Growth Fears, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.16 -9.29%
  
• ISE Sentiment Index 185.0 +96.81%
  
• Total Put/Call .84 -22.22%
  
• NYSE Arms .53 -36.61%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 96.87 -5.13%
  
• European Financial Sector CDS Index 235.45 -4.74%
  
• Western Europe Sovereign Debt CDS Index 272.28 -.91%
  
• Emerging Market CDS Index 261.08 -2.11%
  
• 2-Year Swap Spread 28.50 -.25 basis point
  
• TED Spread 38.50 -.25 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -52.75 +4.0 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 177.0 +4 basis points
  
• China Import Iron Ore Spot $148.80/Metric Tonne +.07%
  
• Citi US Economic Surprise Index 15.40 +10.6 points
  
• 10-Year TIPS Spread 2.30 -1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating a +73 open in Japan
• DAX Futures: Indicating +13 open in Germany
  

Portfolio:

• Higher: On gains in my Retail, Technology, Medical and Biotech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:

• Italy Borrowing Costs Rise on Concern Over Debt Crisis. Italy was forced to pay about 1.1 percentage point more than a month ago to sell three-year debt as concern about Spain’s budget deficit reignites the euro area’s debt crisis. The Treasury sold 2.88 billion euros ($3.78 billion) of a 3-year benchmark bond to yield 3.89 percent, which was less than a maximum target of 3 billion euros and up from 2.76 percent at the previous auction on March 14. Investors bid for 1.43 times the amount offered, down from 1.56 times last month. The Rome- based Treasury also sold 2 billion euros of bonds due in 2015, 2020 and 2023. The auction’s top target was 5 billion euros. “Spain and Italy are the twin bellwethers of the euro-zone crisis,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said by e-mail after the auction. “When one of them catches a cold, the other one sneezes. It’s the similarities between Spain and Italy that concern investors”.
• Monti Tackles Italy Corruption as Scandals Taint Parties. Prime Minister Mario Monti is shifting his focus from overhauling Italy’s economy to tackling corruption, a problem highlighted by the recent resignation of one of the country’s best-known political leaders amid a party- financing scandal. Monti’s government is readying a package of anti-corruption measures, including broadening the criminal definition of corruption to include cases in the private sector and tightening procedures to prevent failed prosecutions due to the statute of limitations, said a person with knowledge of the proposals, who declined to be identified because an official announcement hasn’t been made yet.
• IMF's Lagarde Says Europe Still Main Economic Risk. International Monetary Fund Managing Director Christine Lagarde said the main risk to global growth is a return of Europe’s debt crisis. A recent move by European governments to increase their crisis defenses is only part of the solution, Lagarde said, adding she is hopeful to see progress on her pledge to increase IMF resources when member countries meet in Washington next week. “Risks may not be as large as estimated earlier this year,” Lagarde said in a speech in Washington today. “But let us make no mistake, the risks and the needs are still sizable and it would be very imprudent to ignore that fact.”
• Sovereign, Corporate Bond Risk Falls, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt fell, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell 2.5 basis points to 271.5 at 8 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 14 basis points to 660, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 2.75 basis points to 140.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell seven basis points to 240 and the subordinated index declined 10 to 388.
• Jobless Claims in U.S. Rose Last Week to Two-Month High: Economy. More Americans than forecast filed applications for jobless benefits last week, reinforcing concern among Federal Reserve policy makers that the labor-market recovery will be slow to develop. Unemployment claims increased 13,000 in the week ended April 7 to 380,000, the highest since Jan. 28, the Labor Department reported today in Washington. The median forecast in a Bloomberg News survey called for 355,000 claims.
• U.S. Core Producer Price Index Rises More Than Estimates. Wholesale prices in the U.S. excluding food and fuel rose more than forecast in March, led by a pickup in the costs of light trucks and soaps. The so-called core producer price index climbed 0.3 percent after a 0.2 percent rise, Labor Department figures showed today in Washington. Economists projected a 0.2 percent gain, according to the median estimate in a Bloomberg News survey. The overall gauge was little changed after a 0.4 percent rise.
• India's Industrial Output Rises Less Than Estimated. Indian industrial production rose less than predicted in February as weaker overseas demand and the highest interest rates since 2008 curbed output, with January’s figure revised lower because of a data error. Production (INPIINDY) at factories, utilities and mines advanced 4.1 percent from a year earlier, the Central Statistical Office said in a statement in New Delhi today. The median of 36 estimates in a Bloomberg News survey was for a 6.7 percent gain. January’s reading was cut to 1.1 percent from 6.8 percent after an error was found in sugar output calculations, the office said.
• Oaktree(OAK) Falls in Trading Debut After Raising Less Than Sought. Oaktree Capital Group LLC, the world's largest distressed-debt investor, fell on its first day of trading after raising less than sought in an initial public offering. Oaktree, which began trading today on the New York Stock Exchange under the ticker symbol OAK, declined 5.1 percent to $40.80 at 9:43 a.m. after losing as much as 5.5 percent. The Los Angeles-based firm, co-founded by Howard Marks and Bruce Karsh, raised $380.2 million in its IPO yesterday, about 27 percent less than originally sought.
• Maiden Lane Redux Joins With Europe to Roil CMBS. A $7.49 billion mass of real-estate debt assumed by the Federal Reserve Bank of New York in 2008 is weighing on the commercial-mortgage bond market, exacerbating a slide in values as Europe’s debt crisis flares and doubts mount about the strength of the U.S. economy. Relative yields on securities tied to shopping malls, skyscrapers and hotels have climbed to 206 basis points as of April 10, a six-week high, from a more than four-year low reached March 27, according to a Barclays Plc index. The 29 basis-point widening compares with a 17 basis-point rise in a Bank of America Merrill Lynch corporate bond index.
• Inside the Homes of Obama's High-End Donors. (video) Bloomberg's Hans Nichols gives an inside look at some of the homes where President Obama held fundraisers. He speaks on Bloomberg Television's "Inside Track."
• Oil Rises on Fuel Supply.
  

CNBC.com:

• Chinese Banks 'Great Shorts,' Won't Be Broken Up: Chanos. Chanos, the head of Kynikos Associates, has been betting against China — despite its role as a global economic leader — primarily because he believes the country is overbuilt and does not have the internal demand to support its ambitious growth plans. Nowhere has that trend been more apparent than in the banking system.
• The Global Financial Stress Index is Rising.
• Cut Public Debt Levels to 50% of GDP: OECD. Levels of government debt have soared in most countries since 2008 as a result of the financial crisis and will need to be brought down to “prudent” levels of around 50 percent of gross domestic product to cope with future challenges including health and long-term care and pensions, the OECD said in a report published on Thursday.

Business Insider:

• Catholic Bishops Vow To Resist 'Totalitarian Incursions' Of The Obama Administration.
• The Latest Employment Stats From Greece Are Terrifying.
• Seriously, These Chinese Malls Don't Have Any People In Them.
  

Zero Hedge:

• Uncrossing The Rubicon Toward A Euro Federal State: Germans Challenge ESM, Fiscal Pact In Constitutional Court.
• El-Erian Breaches The Final Frontier: What Happens If Central Banks Fail?
• Goldman(GS) on the Greek Elections.
  

New York Times:

• A Fund-Raiser for Obama, With a Host From The Private Equity World. Not everyone in the private equity industry is sour on Mr. Obama. Hamilton E. James Jr., the president of Blackstone(BX) and one of the few prominent Democratic supporters from the private equity world, will host a fund-raiser for Mr. Obama in mid-May, two people with knowledge of the plans said on Thursday.

Reuters:

• Exclusive - SEC, Goldman(GS) to Settle Research Case for $22 Million - Sources. U.S. securities regulators are preparing to announce that Goldman Sachs will pay $22 million to settle allegations the bank did not have adequate policies to prevent research from being passed inappropriately to preferred clients, people familiar with the matter said on Wednesday.

Financial Times:

• Spanish Shares Are Standout Fallers. Spain’s Ibex index fell 0.8 per cent and has now fallen 14 per cent this year, while most global indices have rallied strongly. Banks led the Spanish decline after Banesto, the Spanish domestic bank, set aside €475m for provisions against bad property loans, and Banco Espírito Santo, Portugal’s largest bank by market capitalisation, launched a €1bn deeply discounted rights issue as part of efforts to rebuild its balance sheet.

Telegraph:

• Gold 'to hit $2,000' on Spain Fears. A looming flare-up in the eurozone crisis over Spain will drive the price of gold towards $2,000 (£1,255) an ounce this year, a leading consultancy predicts.

Macleans.CA:

• Household Debt and the Bank of Canada's Anxiety Levels. (graph) In the graph below, we’ve charted debt-to-income ratios, alongside some increasingly alarmed quotes from BOC governor Mark Carney or other Bank officials.

Bear Radar

Style Underperformer:

• Large-Cap Growth +1.09%

Sector Underperformers:

• 1) Restaurants +.09% 2) Drugs +.29% 3) Biotech +.56%

Stocks Falling on Unusual Volume:

• VQ, OPNT, LRE, MKTX, ILMN, MFRM, FAST, UTHR, INFY, JAZZ and BKS
  

Stocks With Unusual Put Option Activity:

• 1) NFX 2) INFY 3) GT 4) MON 5) FCX
  

Stocks With Most Negative News Mentions:

• 1) GM 2) PGR 3) UTHR 4) BKS 5) DELL
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Mid-Cap Growth +1.59%

Sector Outperformers:

• 1) Coal +4.59% 2) Steel +3.29% 3) Gold & Silver +2.99%

Stocks Rising on Unusual Volume:

• CLF, PZE, ORIG, TITN, TSCO, DNKN, GOLD, MPEL, CLNE, CYT, MCK, HXL, FIO, RDC, ANR, LNKD, HPQ, AGP, MOH, CE and ACI

Stocks With Unusual Call Option Activity:

• 1) MCK 2) VRTX 3) MPEL 4) IRM 5) HCA

Stocks With Most Positive News Mentions:

• 1) AA 2) T 3) MCK 4) AVID 5) GOOG
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines
Bloomberg:

• Spain Yields Trouble Guindos as Rajoy Rallies Party. Spanish Economy Minister Luis de Guindos said the surge in borrowing costs will be a “problem” if it persists, as the government used the threat of a European bailout to rally support behind austerity measures. Spanish 10-year bond yields surged as high as 6 percent yesterday, approaching the levels that pushed Greece, Ireland and Portugal into bailouts, and the extra yield over German bunds held above 400 basis points. In a test of appetite for bonds from the euro region’s periphery, Italy sells as much as 5 billion euros ($6.6 billion) of bonds today. “A spread of more than 400 basis points is obviously a problem” if it persists over the medium term, de Guindos said in Barcelona yesterday. “The government needs to put the house in order because the alternative is much worse.” Prime Minister Mariano Rajoy and his government, in power since Dec. 21, are signaling to Spaniards they risk losing access to financing if they fail to convince investors they can reorder public finances and steer the economy back to growth. Rajoy is trying to persuade voters to accept budget cuts, tax increases and fewer subsidies as the economy suffers its second recession in three years and half of young people are unemployed.
• Europe's Debt Crisis Worsening, Fuels Instability, El-Erian Says. Europe's fiscal crisis is getting worse and will keeping fueling market instability, according to Pacific Investment Management Co.'s Mohamed A. El-Erian. "The problems in Europe are getting bigger," El-Erian, co-chief investment officer at the world's biggest bond fund, said on Bloomberg Radio's "The Hays Advantage" with Kathleen Hays as he prepared to speak before the Federal Reserve Bank of St. Louis. "Europe has a debt issue and Europe has a growth issue, and until Europe deals with both, we are going to have these reoccurring periods of nervousness in the market."
• North Korea Names Kim Jong Un Party Chief. Kim Jong Un was named head of North Korea’s sole political party, solidifying his status ahead of a planned missile launch as soon as today that could halt a U.S. food deal and raise regional tensions. Kim, who is believed to be younger than 30, was named first secretary of the Workers’ Party of Korea, the state-run Korean Central News Agency said yesterday. It was his first government post since becoming head of the country after the December death of his father Kim Jong Il, who was named “eternal general secretary” of the party yesterday, the agency said.
• Roche Signals It's Willing to Up Offer for Illumina(ILMN). Roche Holding AG (ROG) indicated it is willing to raise a $51-a-share bid for Illumina Inc. (ILMN) (ILMN), calling its current offer a “more than reasonable starting point for negotiations” in a letter to Illumina shareholders.
• Inflation Lurks as Stealth Tax on Top of Form 1040 by Caroline Baum. It distorts price signals and leads to a misallocation of capital. It’s a silent way for the government and central bank to devalue the currency, raise prices, help borrowers and punish savers. And it’s exactly the wrong prescription for the U.S. The official push for higher inflation as a cure for a sluggish U.S. recovery began about two years ago with a paper by International Monetary Fund economists, including Chief Economist Olivier Blanchard, titled “Rethinking Macroeconomic Policy.”
• Oil Trades Near One-Week High on U.S. Fuel-Inventory Drop.
• World Bank Cuts China 2012 Growth Outlook on Exports. China’s economic growth may slide to a 13-year low in 2012 as a sluggish world recovery damps export demand and domestic investment and consumption growth decelerate, the World Bank’s latest forecast shows. The Washington-based lender cut its estimate for China’s expansion this year to 8.2 percent in a report released today in Beijing from a January projection of 8.4 percent.

Wall Street Journal:

• Google(GOOG), Amazon(AMZN) Are Potential Buyers for Deal Site Travelzoo(TZOO). Travelzoo’s stock soared by nearly 30 percent today on news that the 14-year-old deals site is planning to sell itself.
• Short Selling Drops on NYSE and Nasdaq. Short-selling fell at the New York Stock Exchange and the Nasdaq Stock Market during the second half of March. In the exchanges' latest twice-a-month statistics, the number of short-selling positions at the NYSE not yet closed out, known as short interest, decreased 1.55%. Those figures were for the period ended March 30, The positions stood at 12,632,330,667 shares, from a revised 12,830,691,538 shares in the period ended March 15. On Nasdaq, short interest decreased 1.29% to 6,872,608,156 shares from 6,962,358,936 shares, over the same period.
• Fearful Final Hours for Briton in China. The day before his death in the fog-shrouded Chinese city of Chongqing, Neil Heywood sensed that something was amiss. The British businessman had been summoned on short notice to a meeting in Chongqing in early November with representatives of the family of Bo Xilai, the local Communist Party chief, according to an account by a friend whom Mr. Heywood contacted at the time. Mr. Heywood told the friend he was "in trouble."
• School Vouchers Gain Ground. Louisiana is poised to establish the nation's most expansive system of school choice by adopting a package of vouchers and other tools that would give many parents control over the use of tax dollars to educate their children. The initiative would effectively redefine vouchers.
• Demolishing Paul Ryan. On current course, House GOP Budget Chairman Paul Ryan himself may exhaust their entire thermonuclear arsenal before November. Once again, the Campaigner in Chief threw the switch himself, calling the Ryan House budget "social Darwinism," "a Trojan horse" and "antithetical to our entire history." Rev. Samuel Rodriquez of the Hispanic Evangelical Association said the poor would be "budget-war collateral damage."

Business Insider:

• GEORGE SOROS: The Euro Crisis Just Entered A 'Less Volatile But More Lethal Phase'.
• This Might Have Something To Do With The Sudden Carnage In Italy.
  

Zero Hedge:

• Bruno Iksil, JPMorgan and the Real Conflict with Credit Default Swaps.
• Global Systemic Risk Is Rising Rapidly Again. (graph)
• Bernanke's Right Hand Dove, Janet Yellen, Hints At ZIRP Through Late 2015.
  

CNBC:

• Herman Cain: 'We're Becoming a Perpetual Nanny State'. The government’s safety net is too big and “growing too fast” under the Obama administration, former contender for the Republican presidential nomination Herman Cain said Wednesday. “We’re not only becoming this perpetual nanny state, the government is encouraging people to come to the government trough,” he said on “The Kudlow Report.”
• PC Shipments Up Nearly 2% in 1st Quarter. The number of personal computers shipped worldwide rose more than expected in the first quarter, but the bump did little to mask the larger challenges for the industry. Gartner Inc. said Wednesday that there were 89 million PCs shipped in the first three months of the year, an increase of 1.9 percent from a year earlier. That's above the research firm's earlier expectations of 1.2 percent. Another research group, IDC, also announced Wednesday that shipments were up 2.3 percent, above its expectations of a 0.9 percent decline. The reports may have beat expectations, but confirmed that the PC industry is in a state of flux.

NY Times:

• Greek Crisis Leaves Cyprus Mired in Debt. Banks in Europe must demonstrate to the European Banking Authority by the end of June that they have enough capital to be viable. Banks that cannot provide that evidence will face pressure to accept government bailouts or, in extreme cases, be shut down. The failure of its biggest bank would have grave consequences for Cyprus, where the economy revolves around financial services — a result of the island’s appeal as a low-tax gateway to the Middle East and Africa for companies from Russia and elsewhere in Europe.

Seeking Alpha:

• 9 High-Growth Biotech Stocks Being Bought Up By Hedge Funds.
  

CNN:

• Iran Woos Oil Buyers With Easy Credit. Iran is trying to skirt US and European sanctions by luring nations to buy its oil on highly advantageous credit terms, say officials in the industry. Tehran has been offering a handful of potential customers in Asia, including India, 180 days of free credit, according to the officials. They estimate that each month of credit amounts to a discount of roughly $1.2 to $1.5 a barrel.

USA Today:

• Teen Financial Confidence Plunges. Talk about teen angst. The latest concerns of the 18-and-under set go way beyond pimples and prom dates: Their level of financial confidence has taken a dramatic slide. Just 56% of kids 14 to 18 think they will be as financially well-off, or better off, than their parents, according to a new survey from Junior Achievement and The Allstate Foundation. That's a huge plunge from 89% in 2011.

Reuters:

• Schwab Warns Against Proposed Money Market Rules. Proposals to further regulate money market funds offer little new protection for investors and could end up devastating the $2.6 trillion industry, Charles Schwab Corp said in a letter sent last week to the U.S. Securities and Exchange Commission.
• Italy 3-Yr Yields Seen Jumping At Auction On Spain, Reform Fears. Italian three-year borrowing costs are set to jump by a full percentage point from a month ago at a bond auction on Thursday, the latest sign investors' concerns about Spain are spreading to other euro zone countries hit by recession.
• McKesson(MCK) Wins New 2-Yr Veterans Affairs Contract. Pharmaceutical wholesaler McKesson Corp on Wednesday said it was selected by the U.S. Department of Veterans Affairs to continue as the VA's prime pharmaceutical supplier for at least two more years. News of the contract, which includes options for up to three two-year extensions, sent shares of McKesson up more than 4 percent in after hours trading.
• U.S. SEC Sues AutoChina for Securities Fraud. U.S. securities regulators on Wednesday sued AutoChina International Ltd, its executives and others for securities fraud. The Securities and Exchange Commission said the company's employees, board members and other Chinese citizens unlawfully bought and sold AutoChina stock to boost its trading volume as the company sought loans. AutoChina, which is based in China and owns and operates a commercial vehicle leasing business there, traded its shares on the NASDAQ stock market until last October.
• Avid(AVID) 1st-Qtr Revenue Forecast Misses, Shares Slip. Avid Technology Inc forecast quarterly revenue that missed analysts' estimates, hurt by weaker demand at one of its business segments, sending the digital audio and video editing software maker's shares down 17 percent after the bell.

Financial Times:

• Chinese Take to Web to Debate Bo's Downfall. China’s web censors laboured in vain on Wednesday as the country’s citizens messaged each other about the one topic on everyone’s mind: the fate of Bo Xilai, the purged party official, and his wife.

Telegraph:

• Europe's Banks Beached as ECB Stimulus Runs Dry. The European Central Bank's €1 trillion (£824bn) lending spree over the winter has stored up a host of fresh problems, leaving parts of the banking system more vulnerable than before as the short-term "sugar rush" nears exhaustion. Credit experts say the Spanish and Italian banks are trapped with large losses on sovereign bonds bought with ECB funds under the three-year lending programme, or Long-Term Refinancing Operation (LTRO). Andrew Roberts, credit chief at RBS, said Spanish banks used ECB funds to purchase five-year Spanish bonds at yields near 3.5pc in February and 4.5pc in December. The same bonds were trading at 4.77pc on Wednesday, implying a large loss on the capital value of the bonds. It is much the same story for Italian banks pressured into buying Italian debt by their own government. Any further dent to confidence in Italy and Spain over coming weeks – either over fiscal slippage or the depth of economic contraction – could push losses to levels that trigger margin calls on collateral. "The banks are deeply underwater. This is turning into a disaster for the eurozone periphery now that the liquidity tap has been turned off," said Mr Roberts. "But given the opposition in Germany, the ECB can't easily do another LTRO until there is a major crisis."

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are unch. to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 166.0 -6.5 basis points.
  
• Asia Pacific Sovereign CDS Index 138.50 -1.5 basis points.
  
• FTSE-100 futures +.01%.
  
• S&P 500 futures +.28%.
  
• NASDAQ 100 futures +.28%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FAST)/.34
• (GOOG)/9.64
• (JBHT)/.52

Economic Releases
8:30 am EST

• The Trade Deficit for February is estimated to shrink to -$51.8B versus -$52.6B in January.
• The Producer Price Index for March is estimated to rise +.3% versus a +.4% gain in February.
• The PPI Ex Food & Energy for March is estimated to rise +.2% versus a +.2% gain in February.
• Initial Jobless Claims are estimated to fall to 355K versus 357K the prior week.
• Continuing Claims are estimated to fall to 3335K versus 3338K prior.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Dudley speaking, Fed's Lockhart speaking, Fed's Plosser speaking, Fed's Raskin speaking, China Fixed Asset Investment/GDP/Industrial Production/Retail Sales data, 30Y T-Bond Auction, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index and the (AYR) analyst event could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and mining shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Higher into Final Hour on Euro Bounce, More Financial/Homebuilding Sector Optimism, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 19.85 -2.65%
  
• ISE Sentiment Index 96.0 +52.38%
  
• Total Put/Call 1.07 +7.0%
  
• NYSE Arms .76 -69.68%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 102.04 -2.19%
  
• European Financial Sector CDS Index 247.14 -3.93%
  
• Western Europe Sovereign Debt CDS Index 274.97 -1.36%
  
• Emerging Market CDS Index 266.06 -1.29%
  
• 2-Year Swap Spread 28.75 -2.5 basis points
  
• TED Spread 38.75 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -56.75 +1.5 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 173.0 +4 basis points
  
• China Import Iron Ore Spot $148.70/Metric Tonne +.47%
  
• Citi US Economic Surprise Index 4.80 +.3 point
  
• 10-Year TIPS Spread 2.31 +6 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a +77 open in Japan
• DAX Futures: Indicating +2 open in Germany
  

Portfolio:

• Higher: On gains in my Retail, Medical and Biotech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades back to its 50-day moving average despite Eurozone debt angst, less tech sector optimism, rising global growth fears, less dovish fed commentary and rising energy prices. On the positive side, Alt Energy, Oil Tanker, Networking, Homebuilding, Restaurant and Bank shares are especially strong, rising more than +1.75%. Small-caps and cyclicals are outperforming. Financials have traded well throughout the day. Major European indices rose around +1.25% today, led higher by a +1.9% gain in Spain. Spain is now down -11.6% ytd, which remains a large red flag for the region. The Bloomberg European Financial Services/Bank Index rose +1.9% and is now down -13.8% in about 3 weeks. The Germany sovereign cds is down -1.9% to 74.16 bps, the France sovereign cds is down -1.88% to 186.0 bps and the Portugal sovereign cds is down -2.93% to 1,102.17 bps. Moreover, the European Investment Grade CDS Index is down -3.0% to 142.02 bps. On the negative side, Steel, Software, HMO, Drug, Computer Service, Disk Drive, Computer, Paper, Ag and Energy shares are lower-to-flat on the day. Tech shares have underperformed throughout the day. Oil is gaining +1.3%, Lumber is down -1.1% and Copper is down -.44%. The 10-year yield is only rising +4 bps to 2.03%. Major Asian indices fell around -.75% overnight, led lower by a -1.1% decline in Hong Kong. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak despite investor perceptions that the US economy is accelerating. Moreover, the Citi US Economic Surprise Index has fallen back to mid-Oct. levels. Lumber is -7.0% since its Dec. 29th high despite the better US economic data, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010. The Baltic Dry Index has plunged around -60.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -18.0% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +712.0% ytd. China's March copper imports fell -4.6% on the month. Overall, credit gauges continue to weaken too much as Europe's debt crisis appears to be in the early stages of reigniting. Market-leader (AAPL) and Dr. Copper did not participate in today's equity rally and bonds barely gave back any of their recent gains, which are all red flags. While the European markets calmed slightly today on rhetoric from an ECB executive board member, I suspect that the markets will eventually force the ECB into actual action before the latest round of debt crisis jitters temporarily subside again. For the recent equity advance to regain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on Eurozone debt angst, less tech sector optimism, rising global growth fears, profit-taking, less dovish fed commentary and rising energy prices.