Wednesday, February 23, 2011

Stocks Falling into Final Hour on Rising Energy Prices, Growing Mideast Unrest, Earnings, Inflation Fears


Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Above Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 21.88 +5.19%
  • ISE Sentiment Index 120.0 +33.33%
  • Total Put/Call .95 -2.06%
  • NYSE Arms .85 -37.82%
Credit Investor Angst:
  • North American Investment Grade CDS Index 85.31 +3.71%
  • European Financial Sector CDS Index 131.17 bps -.34%
  • Western Europe Sovereign Debt CDS Index 177.50 bps +1.81%
  • Emerging Market CDS Index 230.98 +1.36%
  • 2-Year Swap Spread 17.0 -6 bps
  • TED Spread 20.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .11% +1 bp
  • Yield Curve 274.0 -3 bps
  • China Import Iron Ore Spot $184.90/Metric Tonne -1.81%
  • Citi US Economic Surprise Index +77.20 +.6 point
  • 10-Year TIPS Spread 2.41% +4 bps
Overseas Futures:
  • Nikkei Futures: Indicating +11 open in Japan
  • DAX Futures: Indicating -9 open in Germany
Portfolio:
  • Slightly Higher: On gains in my Technology longs, ETF hedges and emerging market shorts
  • Disclosed Trades: Covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades lower despite a pullback in oil from today's high, energy sector strength and positive economic data. On the positive side, Coal, Oil Tanker, Energy, Oil Service, Gold, Bank and Hospital shares are higher on the day. On the negative side, Airline, Disk Drive, Computer, Paper, Alt Energy, Road & Rail and Education shares are under significant pressure, falling more than 1.75%. Cyclicals and Small-Caps are substantially underperforming. The transports are breaking down on volume. Lumber is declining -2.06% and copper is down another -.6%.The Saudi sovereign cds is rising +1.41% to 139.95 bps and the Israeli sovereign cds is jumping +7.30% to 173.13 bps. Moreover, the Spain sovereign cds is rising +2.67% to 264.12 bps, the Greece sovereign cds is gaining +2.33% to 931.25 bps, the Belgium sovereign cds is climbing +2.87% to 177.75 bps and the Brazil sovereign cds is gaining +2.33% to 120.39 bps. China Iron Ore Spot has now fallen -3.65% over 5 days. Investor complacency regarding the situation in the Mideast still seems too high. Oil touched $100/bbl today. In my opinion, any meaningful break above $100/bbl., which is likely, will lead to further broad market weakness. I still believe any significant rise in food or energy prices from current levels will increase the odds of hard-landings in some key emerging market economies. So far, markets are, for the most part, not pricing in this possibility. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Mideast unrest, eurozone sovereign debt angst, technical selling, profit-taking, emerging market inflation fears and more shorting.

1 comment:

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