BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Medical longs, Gaming longs, Computer longs and Internet longs. I added (IWM)/(QQQQ) hedges, added to my (EEM) short substantially and then covered some of these positions today, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is sharply lower, every sector is declining and volume is heavy. Investor anxiety is extraordinarily elevated. Today’s overall market action is very bearish. The VIX is soaring 38.0% and is extraordinarily elevated at 47.85. The ISE Sentiment Index is low at 109.0 and the total put/call is above average at 1.03. Finally, the NYSE Arms has been running below average most of the day and is currently .73. The Euro Financial Sector Credit Default Swap Index is rising 13.2% today to 122.0 basis points. This index is up from a low of 52.66 on May 5th, but down from 157.81 on Sept. 16th. The North American Investment Grade Credit Default Swap Index is rising 4.1% to 181.0 basis points. The TED spread is rising 22.9% to 3.59 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down 13 basis points to 1.63%, which is down 99 basis points in less than three months and at the lowest level since January 2003, when deflation was the concern.The Goldman Sachs Hedge Fund VIP Index(favorite longs of the hedge fund community) is falling another 10.3% today.Emerging markets will likely see further declines tonight.I would not be surprised to finally see more constructive commentary from central bankers in Europe tomorrow.A coordinated global response is likely at this point.Nikkei futures indicate a -500 open in Japan and DAX futures indicate a -180 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on global growth worries, rising credit angst, financial sector pessimism and more shorting.
- Venezuelan crude oil supplies to China fell 9.7% in the first eight months of the year, citing an analysis of shipping data from Lloyd’s Marine Intelligence Unit.
- Europe Stocks May TrailUS as Valuations Mask Slower Profits.Even after plunging 34% from its 2007 peak, Europe’s Dow Jones Stoxx 600 Index may be a worse bet than the S&P 500, which declined 22%, some of the world’s biggest investors say.Earnings decreased at just 34% of companies in the S&P 500 that posted results since the start of July, compared with 46% in the European gauge.Analysts expect earnings in Europe to rebound 12.7% in 2009, about half the pace predicted in the US.Fortis Investments, Standard Life Investments and MFS Investment Management, which oversee about $765 billion, say those expectations for Europe are too optimistic because the region’s economy is heading into a recession.The reluctance by the European Central Bank to reduce interest rates may worsen the region’s economic downturn and curb profits, said James Swanson, who helps manage about $200 billion as the chief investment strategist at MFS.Europe’s economy contracted last quarter for the first time since the introduction of the euro almost a decade ago, yet the ECB held its benchmark interest rate at a seven-year high of 4.25% this month.
- The German government will “clearly” lower its forecast for economic growth next year because of the effects of turmoil in financial markets, citing Economy Minister Michael Glos.“We will probably have to clearly revise down our forecast” of 1.2% growth for 2009.
E24:
- The Norwegian building market will shrink by $3.5 billion next year, hurt by the financial crisis and higher borrowing costs, citing the country’s Construction Association.Both residential and commercial construction will decline, eliminating as many as 15,000 jobs, the group said.
Handelsblatt
- Audi AG, Volkswagen AG’s luxury-car brand, wants to step up US spending to boost sales in the world’s largest automobile market.Audi wants to increase deliveries to almost 100,000 units in the region this year and double that number in the longer term, Audi sales chief Peter Schwarzenbauer said.The VW unit wants to more than double its marketing efforts and spend several hundreds of millions of euros in the US.
El Mercurio:
- Chilean export growth may decline as a result of the worst global financial crisis in decades, chairman of Banco Santander, the country’s biggest bank, said.
Folha de Sao Paulo: - Brazil’s economic growth rate my slow to less than 4% next year, citing government aides close to President Luiz Inacio Lula da Silva.
Nikkei:
- Toyota Motor Corp., Japan’s biggest carmaker, will cut production in China as sales slow in the country.The carmaker will reduce output of passenger cars by about 10% at its factory in Guangdong province.Sales may fall short of a forecast of 10 million this year as slowing economic growth and a slumping stock market undermine consumers’ purchasing power, according to the China Assoc. of Automobile Manufacturers.
Ming Pao Daily News:
- Luxury housing rents in Hong Kong may fall as much as 5% in the fourth quarter as demand from expatriate workers at international financial institutions falters.Luxury housing rents, which held firm in the third quarter, may decline between 3% to 5% in the fourth quarter and early next year as the global economy slows, citing Marcos Chan, head of Hong Kong and Macau research for Jones Lang LaSalle.
Weekend Recommendations
Barron's: - Made positive comments on (MOT), (JAVA), (JPM), (TEL) and (PFE).
Citigroup:
- Reiterated Buy on (TOL), raised target to $31.50.
Night Trading
Asian indices are -.50% to +.25% on avg.
S&P 500 futures -.71%.
NASDAQ 100 futures -.61%.
- Personal Income for August is estimated to rise .2% versus a -.7% decline in July.
- Personal Spending for August is estimated to rise .2% versus a .2% gain in July.
- The PCE Core for August is estimated to rise .2% versus a .3% gain in July.
Other Potential Market Movers
- The (AWI) Investor Meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and shipping shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher.The Portfolio is 100% net long heading into the week.