Friday, April 08, 2011

Stocks Lower into Final Hour on Soaring Food/Energy Prices, Emerging Markets Inflation Fears, Mideast Unrest, Japan Concerns

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Slightly Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 18.28 +6.84%
  • ISE Sentiment Index 139.0 +44.79%
  • Total Put/Call .82 -7.87%
  • NYSE Arms 1.24 +54.02%
Credit Investor Angst:
  • North American Investment Grade CDS Index 92.83 -1.03%
  • European Financial Sector CDS Index 76.08 -9.40%
  • Western Europe Sovereign Debt CDS Index 161.0 bps -.51%
  • Emerging Market CDS Index 193.22 -2.47%
  • 2-Year Swap Spread 18.0 unch.
  • TED Spread 25.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .04% unch.
  • Yield Curve 276.0 +6 bps
  • China Import Iron Ore Spot $180.80/Metric Tonne +.72%
  • Citi US Economic Surprise Index +34.10 -.4 point
  • 10-Year TIPS Spread 2.65% +6 bps
Overseas Futures:
  • Nikkei Futures: Indicating -33 open in Japan
  • DAX Futures: Indicating -21 open in Germany
  • Slightly Lower: On losses in my Medical, Tech and Retail sector longs
  • Disclosed Trades: Added (IWM)/(QQQ) hedges, added to 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 near session lows despite falling eurozone debt angst, earnings optimism, buyout speculation and stock gains overseas. On the positive side, Energy, Disk Drive, Drug and Homebuilding shares are slightly higher on the day. Copper is rising another +1.82%. The Spain sovereign cds is falling -3.35% to 197.01 bps and the Italy sovereign cds is falling -3.68% to 126.53 bps. On the negative side, Airline, Road & Rail, Education, Construction, Hospital, Oil Tanker, Alt Energy and Defense shares are under meaningful pressure, falling more than -1.25%. Cyclicals and small-caps are underperforming. (XLF)/(IYR) have been heavy throughout the day. Oil is up +2.5%, the UBS-Bloomberg Ag Spot Index is rising +.91% and Lumber is falling another -2.56%. Lumber is down about -17.1% in 11 days. The Ag Spot Index is nearing levels that sparked the Tunisian riots. Oil continues to trade well, which is a major negative for the broad market. The US price for a gallon of gas is up +.01 today to $3.74/gallon. It is up .62/gallon in 52 days. The 10-year TIPS spread is breaking out technically, which is also a large negative. Investors had been anticipating a reversal lower in food/energy prices and today's equity weakness is likely a result of a rethinking of this position, in my opinion. Many market leaders continue to trade poorly. Given the numerous headwinds, the equity market still remains extraordinarily resilient, notwithstanding today's mild losses. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, technical selling, rising energy/food prices, rising Mideast unrest, govt. shutdown concerns, emerging markets inflation fears, more hawkish fed commentary, profit-taking and Japan concerns.

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