Monday, April 18, 2011

Stocks Falling Heading Into Final Hour on US/Eurozone Debt Fears, Emerging Market Inflation Fears, Technical Selling, Earnings Jitters

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 17.59 +14.75%
  • ISE Sentiment Index 88.0 -10.20%
  • Total Put/Call .83 -9.78%
  • NYSE Arms .62 -48.81%
Credit Investor Angst:
  • North American Investment Grade CDS Index 96.29 +1.96%
  • European Financial Sector CDS Index 93.83 +9.20%
  • Western Europe Sovereign Debt CDS Index 177.25 bps +2.80%
  • Emerging Market CDS Index 206.51 +3.08%
  • 2-Year Swap Spread 17.0 unch.
  • TED Spread 22.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .05% -1 bp
  • Yield Curve 272.0 unch.
  • China Import Iron Ore Spot $180.90/Metric Tonne -.33%
  • Citi US Economic Surprise Index +20.20 -2.8 points
  • 10-Year TIPS Spread 2.60% -2 bps
Overseas Futures:
  • Nikkei Futures: Indicating -86 open in Japan
  • DAX Futures: Indicating +34 open in Germany
  • Slightly Lower: On losses in my Medical, Retail, Tech 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 trades back below its 50-day moving average on US/European debt fears, emerging markets inflation worries, rising food prices, technical selling, earnings jitters, more shorting, Japan concerns and profit-taking. On the positive side, Homebuilding shares are slightly higher on the day. The 10-year yield is falling -4 bps to 3.37% and the US Dollar Index is +.88% higher despite today's US debt outlook downgrade. Oil is falling -2.04% despite Saudi production cutbacks and commentary. Tech sector leader (AAPL) has reversed into positive territory today on 1Q Mac sales optimism and iPhone production reports. On the negative side, Construction, HMO, I-Banking, Networking, Semi, Paper, Steel, Energy, Oil Tanker, Alt Energy and Coal shares are under significant pressure, falling more than 2.0%. (XLF) and the Transports have been heavy throughout the day. As well, small-caps are underperforming. Gold is rising +.51%, lumber is declining -1.56% and copper is falling -1.03%. The UBS-Bloomberg Spot Ag Index is rising +.65%. The US price for a gallon of gas is rising +.01/gallon today to $3.83/gallon. It is up .71/gallon in 62 days. The Spain sovereign cds is jumping +4.9% to 246.79 bps, the Italy sovereign cds is soaring +10.36% to 158.08 bps, the Ireland sovereign cds is climbing +6.64% to 608.38 bps, the Portugal sovereign cds is rising +3.47% to 623.88 bps, the Belgium sovereign cds is rising +6.24% to 145.64 bps, the UK soverign cds is rising +4.0% to 57.94 bps, the Russia sovereign cds is jumping +7.92% to 139.0 bps and the Greece sovereign cds is surging +6.19% to 1,297.50 bps. The Greece and Portugal sovereign cds are making new record highs. Moreover, the Spain sovereign cds continues to surge. The Eurozone Investment Grade CDS Index is jumping +5.51% to 70.08 bps. The US sovereign cds is soaring +18.9% to 49.33 bps and the US Muni CDS Index is climbing +3.0% to 154.38 bps. Singapore Electronics exports fell -13.8% in March, which was the largest decline since Oct. 2009. Technical action in India's Sensex is poor. A convincing break back below its 200-day moving average is likely. Given the obvious headwinds, investor complacency remains fairly elevated. I suspect today's stock weakness is more related to emerging market hard landing fears and a flaring up in the Eurozone debt situation than perceived. The US debt outlook downgrade is a large negative, but was expected. I expect US stocks to trade modestly lower into the close from current levels on more shorting, rising eurozone/US debt angst, emerging market inflation fears, Japan concerns, technical selling, rising food prices and profit-taking.

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