Stocks Slightly Lower into Final Hour on Profit-Taking, Mideast Tensions, Emerging Market Inflation Fears, Rising Long-Term Rates

Broad Market Tone:

• Advance/Decline Line: Slightly Lower
  
• Sector Performance: Mixed
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 17.32 -1.76%
  
• ISE Sentiment Index 106.0 -24.82%
  
• Total Put/Call .75 -6.25%
  
• NYSE Arms 1.46 +140.75%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 83.34 +.71%
  
• European Financial Sector CDS Index 135.05 bps -1.89%
  
• Western Europe Sovereign Debt CDS Index 161.0 bps -3.69%
  
• Emerging Market CDS Index 211.91 -.27%
  
• 2-Year Swap Spread 22.0 unch.
  
• TED Spread 16.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 283.0 -1 bp
  
• China Import Iron Ore Spot $185.60/Metric Tonne unch.
  
• Citi US Economic Surprise Index +42.0 +1.6 points
  
• 10-Year TIPS Spread 2.34% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +28 open in Japan
• DAX Futures: Indicating +6 open in Germany

Portfolio:

• Slightly Higher: On gains in my Ag, Biotech and Tech long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades just slightly lower, despite recent equity gains, rising Mideast tensions, emerging markets inflation worries and rising long-term rates. On the positive side, Networking, Disk Drive, Computer, Ag, Oil Service, Oil Tanker and Alt Energy shares are especially strong, rising more than 1.0%. Tech shares have outperformed throughout the day. Copper is rising +.18%. The Italy sovereign cds is dropping -4.04% to 157.93 bps, the Portugal sovereign cds is falling -3.31% to 390.58 bps, the Hungary sovereign cds is falling -4.73% to 290.16 bps, the Belgium sovereign cds is declining -4.95% to 149.93 bps and the UK sovereign cds is falling -5.51% to 61.29 bps. Moreover, the US Muni CDS Index is falling -1.97% to 191.25 bps. On the negative side, Airline, Road&Rail, Retail, Homebuilding, Insurance and Coal shares are under pressure, falling more than 1.0%. (XLF) is underperforming. The Transports are also relatively weak. The UBS-Bloomberg Ag Spot Index is rising +1.71% to another new record high. Lumber is falling -3.17%. The 10-Year yield is rising +4 bps to 3.48%. The Egypt sovereign cds is rising +7.95% to 377.91 bps, the Saudi sovereign cds is gaining +4.26% to 118.81 bps and the Russia sovereign cds is climbing +1.35% to 144.12 bps. I still expect another push higher in the major averages over the coming days, barring any unexpected spike in energy prices. I expect US stocks to trade mixed-to-higher into the close from current levels on earnings optimism, diminishing eurozone debt angst, stable energy prices and rising economic optimism.