Broad Market Tone: - Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Volume: Around Average
- Market Leading Stocks: Underperforming
Equity Investor Angst: - VIX 15.89 -.38%
- ISE Sentiment Index 137.0 +28.04%
- Total Put/Call .79 unch.
- NYSE Arms .70 -20.31%
Credit Investor Angst:- North American Investment Grade CDS Index 102.86 bps +.11%
- European Financial Sector CDS Index 245.39 bps +.78%
- Western Europe Sovereign Debt CDS Index 244.23 +.98%
- Emerging Market CDS Index 242.73 -1.07%
- 2-Year Swap Spread 19.25 -.25 basis point
- TED Spread 34.0 -2.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -37.75 +.75 basis point
Economic Gauges:- 3-Month T-Bill Yield .10% +2 basis points
- Yield Curve 137.0 +5 basis points
- China Import Iron Ore Spot $116.20/Metric Tonne -.34%
- Citi US Economic Surprise Index -33.80 +.9 point
- 10-Year TIPS Spread 2.21 +4 basis points
Overseas Futures: - Nikkei Futures: Indicating +96 open in Japan
- DAX Futures: Indicating +1 open in Germany
Portfolio:
- Higher: On gains in my Retail, Medical and Tech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, then covered some of them
- Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 builds on recent gains despite rising eurozone debt angst, high food/energy prices, US "fiscal cliff" worries, earnings concerns and rising global growth fears. On the positive side, Coal, Alt Energy, Oil Tanker, Energy, Semi, Disk Drive, Networking, I-Banking, HMO, Education and Hospital shares are especially strong, rising more than +1.5%. Small-caps are relatively strong. Tech and Commodity-related shares have traded well throughout the day, as well. The UBS-Bloomberg Ag Spot Index is down -.8% and Copper is rising +1.3%. The 10Y Yld is gaining +7 bps to 1.63%. Major Asian indices were mostly higher overnight, led by a +1.1% gain in India. Major European indices were mostly higher, boosted by a +2.2% gain in Spain. The France sovereign cds is falling -1.98% to 145.98 bps, the Japan sovereign cds is down -3.3% to 84.91 bps and the Italian/German 10Y Yld Spread is falling -2.7% to 448.63 bps. On the negative side, Utility, Drug, REIT, Airline, Road & Rail, Telecom and Biotech shares are lower-to-flat on the day.
The Transports have not participated in the last 2 days of broad market rally.
Oil is rising +1.3%. The Bloomberg European Bank/Financial Services Index fell -.41% today and Brazilian stocks are falling -.7%. The UK sovereign cds is rising +.8% to 56.17 bps and the Spain 10Y Yld is gaining +1.8% to 6.86%.
The UBS/Bloomberg Ag Spot Index is up +24.4% in about 9 weeks.
The benchmark China Iron/Ore Spot Index is down -35.8% since 9/7/11.
Moreover, the
China Hot Rolled Steel Sheet Spot Index is also picking up downside steam. As well, despite their recent bounces off the lows, the euro, copper and lumber all continue to trade poorly given equity investor perceptions that global central bank stimuli will boost economic growth in the near future.
US weekly retail sales have decelerated to a sluggish rate at +2.0%. US Trucking Traffic continues to soften.
Moreover, the Citi US Economic Surprise Index, while showing some improvement recently, is still back to Sept. 2011 levels. Lumber is -3.0% since its March 1st high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite investor perceptions of a big improvement in the nationwide housing market. The Baltic Dry Index has plunged around -60.0% from its Oct. 14th high and is now down around -50.0% ytd. Shanghai Copper Inventories have risen +76.0% ytd.
Oil tanker rates have plunged recently, with the benchmark Middle East-to-US voyage down to 22.50 industry-standard worldscale points, which is the lowest since May, 2009.
The CRB Commodities Index is now down -17.3% since May 2nd of last year despite the recent surge in food/energy prices.
The 10Y T-Note continues to trade too well.
There still appears to be a fairly high level of complacency among US investors regarding the deteriorating macro backdrop. It remains unclear to me whether or not Germany will put its own balance sheet on the line to save the euro even as investors have been pricing this outcome into stocks.
The Citi Eurozone Economic Surprise Index is at -67.90 points, which is near the lowest since mid-Sept. of last year.
Massive tax hikes and spending cuts are still yet to hit in several key eurozone countries that are already in recession. A lack of competitiveness remains unaddressed.
The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades.
Uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff" and the election outcome uncertainty will likely become more and more of a focus for investors as the year progresses.
Little if anything being discussed by global central bankers will actually boost global economic growth in any meaningful way over the intermediate-term, in my opinion.
Thus, recent market p/e multiple expansion on global central bank stimulus hopes, is creating an unstable situation for equities, which could become a big problem this fall unless a significant macro catalyst materializes soon. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices, a US "fiscal cliff" solution 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, profit-taking, more shorting, technical selling, high food/energy prices, earnings worries, US "fiscal cliff" concerns and rising global growth fears.
