Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on profit-taking, rising global growth fears, less US economic optimism, more shorting, rising Eurozone debt angst, less financial sector optimism and high energy prices. My intermediate-term trading indicators are giving mostly bullish signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,370.26 -1.99%*



The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,370.26 -1.99%
  
• DJIA 12,849.50 -1.61%
  
• NASDAQ 3,011.33 -2.24%
  
• Russell 2000 796.29 -2.67%
  
• Wilshire 5000 14,217.70 -2.01%
  
• Russell 1000 Growth 650.44 -1.83%
  
• Russell 1000 Value 667.84 -2.10%
  
• Morgan Stanley Consumer 793.28 -1.23%
  
• Morgan Stanley Cyclical 975.60 -2.33%
• Morgan Stanley Technology 693.16 -1.45%
  
• Transports 5,197.04 -1.65%
  
• Utilities 452.10 -1.45%
  
• MSCI Emerging Markets 42.47 -.98%
  
• Lyxor L/S Equity Long Bias Index 1,028.80 -1.17%
  
• Lyxor L/S Equity Variable Bias Index 815.11 -1.0%
  
• Lyxor L/S Equity Short Bias Index 539.04 unch.
  

Sentiment/Internals

• NYSE Cumulative A/D Line 143,338 -.18%
  
• Bloomberg New Highs-Lows Index -8 +147
  
• Bloomberg Crude Oil % Bulls 36.4 +103.3%
  
• CFTC Oil Net Speculative Position 197,582 -8.34%
  
• CFTC Oil Total Open Interest 1,563,132 -.38%
  
• Total Put/Call .94 unch.
  
• OEX Put/Call 2.77 +78.71%
  
• ISE Sentiment 100.0 +2.04%
  
• NYSE Arms 1.89 +19.62%
  
• Volatility(VIX) 19.55 +17.07%
• S&P 500 Implied Correlation 66.2 +2.83%
  
• G7 Currency Volatility (VXY) 9.86 -3.62%
  
• Smart Money Flow Index 11,111.87 -.68%
  
• Money Mkt Mutual Fund Assets $2.584 Trillion -.20%
  
• AAII % Bulls 28.1 -26.28%
  
• AAII % Bears 41.6 +49.5%

Futures Spot Prices

• CRB Index 302.85 -1.19%
  
• Crude Oil 102.83 -.41%
  
• Reformulated Gasoline 334.61 +.27%
  
• Natural Gas 1.98 -4.87%
  
• Heating Oil 317.46 +.03%
  
• Gold 1,660.20 +1.64%
  
• Bloomberg Base Metals Index 215.25 -.64%
  
• Copper 362.70 -4.70%
  
• US No. 1 Heavy Melt Scrap Steel 402.67 USD/Ton unch.
  
• China Iron Ore Spot 149.40 USD/Ton +1.22%
  
• Lumber 270.3 -.59%
  
• UBS-Bloomberg Agriculture 1,525.12 -1.86%
  

Economy

• ECRI Weekly Leading Economic Index Growth Rate 1.4% +50 basis points
  
• Philly Fed ADS Real-Time Business Conditions Index -.2484 +3.31%
  
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 109.23 +.46%
  
• Citi US Economic Surprise Index 14.70 +7.8 points
  
• Fed Fund Futures imply 56.0% chance of no change, 44.0% chance of 25 basis point cut on 4/25
  
• US Dollar Index 79.88 +.05%
  
• Yield Curve 171.0 -13 basis points
  
• 10-Year US Treasury Yield 1.98% -20 basis points
  
• Federal Reserve's Balance Sheet $2.850 Trillion -.45%
  
• U.S. Sovereign Debt Credit Default Swap 29.56 +.46%
  
• Illinois Municipal Debt Credit Default Swap 218.0 -14.86%
  
• Western Europe Sovereign Debt Credit Default Swap Index 279.43 +2.55%
  
• Emerging Markets Sovereign Debt CDS Index 289.91 +5.0%
  
• Saudi Sovereign Debt Credit Default Swap 119.90 +.53%
• Iraqi 2028 Government Bonds 83.85 -.35%
• China Blended Corporate Spread Index 644.0 +16 basis points
  
• 10-Year TIPS Spread 2.27% -2 basis points
  
• TED Spread 38.5 -1.75 basis points
  
• 3-Month Euribor/OIS Spread 41.0 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -50.75 +3.25 basis points
  
• N. America Investment Grade Credit Default Swap Index 100.14 -.03%
  
• Euro Financial Sector Credit Default Swap Index 247.10 +4.89%
  
• Emerging Markets Credit Default Swap Index 265.73 +3.88%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 183.0 +24 basis points
  
• M1 Money Supply $2.244 Trillion +1.14%
  
• Commercial Paper Outstanding 928.50 -.30%
  
• 4-Week Moving Average of Jobless Claims 368,500 +6,700
  
• Continuing Claims Unemployment Rate 2.6% unch.
  
• Average 30-Year Mortgage Rate 3.88% -10 basis points
  
• Weekly Mortgage Applications 678.80 -2.43%
  
• Bloomberg Consumer Comfort -32.8 -1.4 points
  
• Weekly Retail Sales +4.10% +50 basis points
  
• Nationwide Gas $3.90/gallon -.04/gallon
  
• U.S. Cooling Demand Next 7 Days 9.0% above normal
• Baltic Dry Index 972.0 +4.97%
  
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 42.50 unch.
  
• Rail Freight Carloads 231,153 -4.79%
  

Best Performing Style

• Mid-Cap Growth -1.73%
  

Worst Performing Style

• Small-Cap Value -2.71%

Leading Sectors

• Coal +2.92%
  
• Gold & Silver +1.42%
• Steel +1.18%
• Restaurants +1.09%
• Gaming +.05%

Lagging Sectors

• Disk Drives -3.35%
• Energy -3.42%
  
• Banks -3.48%
• Biotech -4.62%
• HMOs -7.60%

Weekly High-Volume Stock Gainers (4)

• AOL, TITN, TZOO and MFRM
  

Weekly High-Volume Stock Losers (8)

• DLLR, GBX, OPTR, GKSR, BKS, OPNT, MOH and VPHM
  

Weekly Charts
ETFs

• High-Volume Gainers
• High-Volume Losers

Stocks

• High-Volume Gainers
• High-Volume Losers
  

*5-Day Change

Stocks Falling into Final Hour on Less Homebuilder/Financial Sector Optimism, Rising Eurozone Debt Angst, Rising Global Growth Fears

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 19.06 +10.81%
  
• ISE Sentiment Index 96.0 -36.0%
  
• Total Put/Call .93 +10.71%
  
• NYSE Arms 1.37 +238.17%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 100.88 +4.27%
  
• European Financial Sector CDS Index 247.10 +5.02%
  
• Western Europe Sovereign Debt CDS Index 279.13 +2.35%
  
• Emerging Market CDS Index 265.32 +1.51%
  
• 2-Year Swap Spread 30.0 +2.0 basis points
  
• TED Spread 38.50 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -50.75 +2.0 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 172.0 -4 basis points
  
• China Import Iron Ore Spot $149.40/Metric Tonne +.40%
  
• Citi US Economic Surprise Index 14.70 -.7 point
  
• 10-Year TIPS Spread 2.28 -2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -52 open in Japan
• DAX Futures: Indicating +2 open in Germany
  

Portfolio:

• Lower: On losses in my Retail, Technology, Medical and Biotech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 tests its 50-day moving average on rising Eurozone debt angst, less financial sector optimism, rising global growth fears, less dovish fed commentary and high energy prices. On the positive side, Utility, Restaurant and Software shares are higher on the day. Oil is falling -.7%, Gold is down -1.2% and the UBS-Bloomberg Ag Spot Index is down -1.3%. Major Asian indices rose around +1.25% overnight, led by a +1.8% gain in Hong Kong, despite weaker than expected economic data out of China. I continue to believe that China is not as close as many perceive to another major easing campaign. Indian shares, which had been a top global-performer during the Jan./Feb. rally, fell -1.4% and are now down -7.8% from their Feb. 22 high. The Sensex is very close to a technical breakdown, as well. On the negative side, Coal, Oil Service, Bank, I-Banking, Construction, Education, Alt Energy, Semi, Medical and Homebuilding shares are especially weak, falling more than -1.75%. Small-caps are relatively weak. Financial/Homebuilding shares have underperformed throughout the day. Copper is down -2.5%. The 10-year yield is falling -6 bps to 1.99%. Major European indices are falling around -2.5%, led down by a -3.4% decline in Spain. Spanish equities have plunged -30.2% from their Feb. 9 highs and are now down -15.4% ytd. The IBEX is close to its March 9, 2009 low. The Bloomberg European Financial/Bank Index is down -3.1% today and is down -15.0% in less than a month. The Germany sovereign cds is gaining +4.2% to 73.17 bps, the France sovereign cds is up +3.7% to 186.99 bps and the Spain sovereign cds is up +4.4% to 502.17 bps(new all-time high). Moreover, the European Investment Grade CDS Index is jumping +6.85% to 143.85 bps and the Italian/German 10Y Yld Spread is rising +4.7% to 378.79 bps. US Rail Traffic continues to soften. 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 -55.0% from its Oct. 14th high and is now down around -40.0% 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-leaders are continuing their recent trend of underperformance, Dr. Copper trades poorly and bonds trade too well, which are all red flags. I have been cautioning about the dramatic underperformance in Spanish equities for some time. As well, the massive tax hikes/spending cuts that are coming down the pike there will only worsen their economy further, which will likely prove the domino that reignites the region’s debt crisis once again over the coming months. I continue to believe the LTRO, while a short-term can-kicking solution, will be viewed in a very negative light over the intermediate-term. US investor complacency regarding the situation in Europe remains fairly high, in my opinion. 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 modestly lower into the close from current levels on rising Eurozone debt angst, less financial/homebuilding sector optimism, rising global growth fears, profit-taking, less dovish fed commentary and high energy prices.

Today's Headlines

Bloomberg:

• Europe's Capital Flight Betrays Currency's Fragility. The euro area’s financial troubles appear to be flaring up again, as this week’s gyrations in the Spanish bond market show. In reality, they never went away. And judging from the flood of money moving across borders in the region, Europeans are increasingly losing faith that the currency union will hold together at all. In recent months, even as markets seemed calm, sophisticated investors and regular depositors alike have been pulling euros out of struggling countries and depositing them in the banks of countries deemed relatively safe. Such moves indicate increasing concern that a financially strapped country might dump the euro and leave depositors holding devalued drachma, lira or pesetas.
• Spain Banks Boost Borrowing From ECB by 50% in March. Spanish banks’ borrowings from the European Central Bank jumped by almost 50 percent in March, reaching the most on record, as lenders tap emergency loans and channel some of it into sovereign debt purchases. Average net borrowings by Spanish banks climbed to 227.6 billion euros ($300 billion) last month from 152.4 billion euros in February, the Bank of Spain said on its website today. Spanish lenders took 29 percent of the total long-term loans offered to euro-region banks, the data showed. That includes the three-year long-term refinancing operation loans known as LTRO.
• Spanish Risk at Record High as Rajoy Struggles to Avoid Bailout. The cost of insuring against a Spanish default jumped to a record as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to need a bailout. Credit-default swaps on Spain rose 17 basis points to 498 as of 4 p.m. in London, surpassing the previous all-time high closing price of 493, according to CMA. The contracts are up from 431 at the start of the month and 380 at the end of 2011, signalling a deterioration in investor perceptions of credit quality. “Spain is viewed as the next most likely to be in need of a financing program,” said Brian Barry, an analyst at Investec Bank Plc in London. “It’s not surprising to see CDS widening.” The rate on Spain’s 10-year note rose 17 basis points today to 5.99 percent, 21 basis points up from a week ago. Royal Bank of Canada said in a note that rising borrowing costs increased the chances that the country will seek some sort of external aid, such as having a European Union bailout fund buy up its debt. Sovereign insurance costs also rose elsewhere, with the Markit iTraxx SovX Western Europe Index of default swaps on 15 governments climbing four basis point to 278.5. The gauge was at 265.5 basis points on April 3.
  
• Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate debt rose, according to BNP Paribas SA. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings jumped 14 basis points to 656 at 9:51 a.m. in London, and is heading for a fourth weekly rise. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.5 basis points to 136.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased six basis points to 242 and the subordinated index climbed 5.5 to 390.5.
• Italians Rally in Rome Against Monti's Pension-Revamp Gap. Italy’s main labor unions took to the streets of Rome today to protest Prime Minister Mario Monti’s pension-system overhaul, saying it traps hundreds of thousands of workers in a legal limbo without retirement pay. Tens of thousands of people marched through the streets of central Rome this morning before a rally where union leaders criticized the government for underestimating the extent of the problem. Last night the Labor Ministry said there are 65,000 Italians who may be left without support between when they leave work and when their pension kick in as the higher retirement age delays their payout. Unions say the figure is about five times that amount.
• Greece Euro Exit Would Trigger Chain Reaction, Schulz Tells FAZ. A decision by Greece to give up the euro would trigger a chain reaction that would force Spain and Portugal out of the common currency, European Parliament President Martin Schulz said in an interview with Frankfurter Allgemeine Zeitung in which he warned against such a step. A failure of the euro would risk reversing European economic integration as currency depreciations and appreciations would prompt countries to set up trade barriers, Schulz said in an interview.
• European Stocks Drop on Debt Fears, Slower China Growth. European stocks fell, for the longest streak of weekly losses since August, as concern resurfaced about the euro-area’s debt crisis and China’s economic growth slowed last quarter more than forecast. UniCredit SpA and Banca Popolare di Milano Scarl (PMI) led European banks lower. Banco Santander SA, the biggest Spanish lender, fell 3.2 percent. Cap Gemini (CAP) SA dropped 5.1 percent.
• Consumer Sentiment in U.S. Eases as Employment Growth Diminishes: Economy. Confidence among U.S. consumers cooled in April from a one-year high, a sign the moderation in job growth may limit the biggest part of the economy. The Thomson Reuters/University of Michigan’s preliminary index of sentiment dropped to 75.7 from 76.2 last month. The measure was projected to be unchanged, according to a median forecast in a Bloomberg News survey of economists. Tempered optimism follows the slowest month of job growth since October and a drop in weekly earnings that may restrain household purchases that account for about 70 percent of the economy. Tempered optimism follows the slowest month of job growth since October and a drop in weekly earnings that may restrain household purchases that account for about 70 percent of the economy. The Michigan index of current conditions, which reflects Americans’ perceptions of their financial situation and whether it’s a good time to buy big-ticket goods like cars, declined to a four-month low of 80.6 in April from 86 a month earlier.
• Consumer Prices in U.S. Increased at a Slower Pace in March. The consumer-price index climbed 0.3 percent, matching the median forecast of economists surveyed by Bloomberg News, after increasing 0.4 percent the prior month, Labor Department data showed today in Washington. The so-called core measure, which excludes more volatile food and energy costs, rose 0.2 percent.
• Wells Fargo(WFC), JPMorgan(JPM) Label More Junior Home Loans as Bad Assets. Wells Fargo & Co. (WFC) (WFC) and JPMorgan Chase & Co. (JPM) (JPM) labeled $3.3 billion of junior liens as bad assets after regulators pushed the nation’s biggest banks to rethink the value of second mortgages whose collateral has vanished. Wells Fargo classified $1.7 billion of junior liens as nonperforming in the quarter, leading to an increase in overall soured loans, and JPMorgan gave that designation to $1.6 billion of such loans, according to their first-quarter presentations today.

Wall Street Journal:

• Moody's Decides On Possible Italian Bank Downgrades Next Week.
• China Strains to Contain Buzz Around Bo Xilai. China's propaganda machine has gone into overdrive following the removal of top Communist Party leader Bo Xilai and a murder investigation into his wife, reflecting insecurities within the leadership amid the worst political crisis in a generation. A strongly worded editorial emphasizing the need for party discipline was splashed across the front pages of newspapers across the country on Friday.
  

MarketWatch:

• Utica Shale Bringing Jobs to Eastern Ohio.

CNBC.com:

• Is The World's Biggest Economy in Danger of Disintegrating? It is the world's biggest economy, China's largest export market and the top contributor to the International Monetary Fund (IMF). And while its politicians and citizens may feel some sense of belonging to the European Union, the sovereign debt crisis has shown that when the going gets tough, few people identify with Europe.
• Flurry of Fed Comments Suggest Less Chance of Easing.
  

Business Insider:

• Egyptians Are Terrified The Military Is Going To Take Over The Country.
• Obama is Slammed For 'Jetting Around' On Vacation And Being Out Of Touch.
  

Zero Hedge:

• Steinhardt On The Fed's Failure And The End Of Wall Street As We Know It.
• Spain CDS Notional Update.
• Austerity, Social Unrest, And Europe's 'Lose-Lose' Proposition.
  

NY Post:

• New York Times(NYT) Journalist Says Sulzberger 'Piloting Ghost Ship'. The mood is turning uglier inside the New York Times, where publisher and acting CEO Arthur Sulzberger Jr. has again been ripped for his globe-trotting ways, this time by a veteran newsman who, in an e-mail to more than 150 friends, accuses the boss of piloting a “ghost ship.”

New York Times:

• German Maker of Robots Gains as Chinese Wages Rise.

Pragmatic Capitalism:

• Rail Traffic Continues to Soften. (graph)

Rasmussen Reports:

• 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-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).

Reuters:

• Fitch: U.S. Housing Not Keeping Pace With Improving Investor Sentiment.
• Exclusive: G20 May Boost IMF Resources by $400-500 Billion: Officials. The world's 20 biggest economies are likely to agree to increase the resources of the International Monetary Fund by between $400 and $500 billion, rather than the $600 billion initially sought by the IMF, Group of 20 officials have told Reuters. The extra money is to give the IMF, which is a lender of last resort to governments, more firepower to fight the sovereign debt crisis, triggered by unsustainable policies in euro zone countries such as Greece, Portugal and Ireland.
• Exclusive - Iran Ships "off radar" as Tehran Conceals Oil Sales. Iran is concealing the destination of its oil sales by disabling tracking systems aboard its tanker fleet, making it difficult to assess how much crude Tehran is exporting as it seeks to counter Western sanctions aimed at cutting its oil revenues. Most of Iran's 39-strong fleet of tankers is now "off-radar" after Tehran ordered captains in the National Iranian Tanker Co (NITC) to switch off the black box transponders that are used in the shipping industry to monitor vessel movements, oil industry, trading and shipping sources said.
• Copper Falls Below $8,000, China Data Disappoints.
• China March Crude Steel Output Hits Record. China's crude steel output hit a monthly record of 61.58 million tonnes in March, up 10 percent from February, data from the National Bureau of Statistics showed on Friday. Daily crude steel output reached 1.986 million tonnes, its highest since June last year.
• Goldman Sachs(GS) CEO Gets $16.2 Million Pay Package. Goldman Sachs Group Inc Chief Executive Lloyd Blankfein's compensation increased 14.5 percent to $16.2 million in 2011 despite a sharp decline in profits and share price during the year, leaving the bank open to more attacks on its pay policies.
• Obama Orders Oversight Group On Shale Gas.
  

Telegraph:

• Debt Crisis: Live. Spanish shares tumble 3pc after the country's borrowing costs rose again on worries over its banks, triggering sell-offs in European and US markets as slowing growth in China added to fears for the world economy.

Bear Radar

Style Underperformer:

• Small-Cap Value -1.20%

Sector Underperformers:

• 1) Coal -3.51% 2) I-Banks -2.60% 3) Banks -2.65%

Stocks Falling on Unusual Volume:

• BCS, TI, DB, TEF, E, AAPL, INFY, IOSP, ILMN, GOOG, CTSH, CREE, ETFC, DWSN, ZION, ANEN, AMTD, QCOM, VCO, IVC, SJR, APL, STI and ANR
  

Stocks With Unusual Put Option Activity:

• 1) REE 2) HBC 3) ZION 4) GOOG 5) CTSH
  

Stocks With Most Negative News Mentions:

• 1) CNX 2) KBH 3) BAC 4) WFC 5) JPM
  

Charts:

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