Tuesday, April 26, 2011

Stocks Higher into Final Hour on Earnings Optimism, Less Tech Sector Pessimism, Short-Covering, Lower Long-Term Rates

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Almost Every Sector Rising
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 15.42 -2.22%
  • ISE Sentiment Index 109.0 unch.
  • Total Put/Call .81 +9.46%
  • NYSE Arms 1.12 -13.82%
Credit Investor Angst:
  • North American Investment Grade CDS Index 92.59 -.90%
  • European Financial Sector CDS Index 91.25 +1.76%
  • Western Europe Sovereign Debt CDS Index 192.62 +1.69%
  • Emerging Market CDS Index 203.57 -.29%
  • 2-Year Swap Spread 18.0 unch.
  • TED Spread 22.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .05% unch.
  • Yield Curve 269.0 -3 bps
  • China Import Iron Ore Spot $178.90/Metric Tonne unch.
  • Citi US Economic Surprise Index 12.10 +1.9 points
  • 10-Year TIPS Spread 2.57% -2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +102 open in Japan
  • DAX Futures: Indicating +33 open in Germany
  • Higher: On gains in my Medical, Biotech, Retail and Tech sector longs
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 surges to a new multi-year high, despite US/European debt fears, emerging markets inflation worries and Mideast unrest. On the positive side, Airline, Road & Rail, HMO, Hospital, Paper, Tobacco and Biotech shares are especially strong, rising more than +1.75%. Small-caps and cyclicals are outperforming. The Transports are also hitting a multi-year high. Copper is rising +.38%. The 10-Year Yield is falling -6 bps to 3.31%. The US Muni CDS Index is falling -2.44% to 137.86 bps. Weekly retail sales jumped +5.0%, which is the largest percentage increase since the week of May 2, 2006. On the negative side, Restaurant, Construction, Computer and Coal shares are lower on the day. Lumber is falling another -2.38%. The US price for a gallon of gas is rising .01/gallon today to $3.87/gallon. It is up .75/gallon in 70 days. The Greece sovereign cds is climbing +5.72% to 1,435.67 bps, the Ireland sovereign cds is rising +3.35% to 662.63 bps and the Portugal sovereign cds is rising +2.41% to 675.50 bps. The Greece, Ireland and Portugal sovereign cds are now all at new record highs. The US dollar continues to trade very poorly. The Shanghai Composite fell another -.88% last night, breaking below its 50-day moving average. The China 7-Day Repo Rate jumped +56 bps to 4.43% last night, which is the highest level since February 23rd. I suspect volatility will increase tomorrow, but stock action will be rather muted in response to the Fed's comments. Bonds may weaken after recent gains. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less tech sector pessimism, earnings optimism, buyout speculation, falling long-term rates and technical buying.

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