Monday, April 11, 2011

Stocks Lower into Final Hour on Emerging Markets Inflation Fears, Japan Concerns, Technical Selling, Mideast Unrest

Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: About Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 16.66 -6.72%
  • ISE Sentiment Index 121.0 +4.31%
  • Total Put/Call .91 +5.81%
  • NYSE Arms 1.03 -10.03%
Credit Investor Angst:
  • North American Investment Grade CDS Index 93.51 +.73%
  • European Financial Sector CDS Index 76.58 -3.62%
  • Western Europe Sovereign Debt CDS Index 160.83 bps -.10%
  • Emerging Market CDS Index 194.18 +.71%
  • 2-Year Swap Spread 18.0 unch.
  • TED Spread 25.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .04% unch.
  • Yield Curve 275.0 -1 bps
  • China Import Iron Ore Spot $183.0/Metric Tonne +1.22%
  • Citi US Economic Surprise Index +32.80 -1.3 points
  • 10-Year TIPS Spread 2.64% -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating -90 open in Japan
  • DAX Futures: Indicating -1 open in Germany
  • Slightly Higher: On gains in my Medical, Biotech and Retail sector longs and ETF hedges
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
  • Market Exposure: 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, diminishing govt shutdown fears, buyout speculation and falling energy prices. On the positive side, Medical Equipment, Drug, Airline, Food, Retail and Tobacco shares are slightly higher on the day. The Transports are just -.2% lower on the day. Oil is falling -3.2% and gold is declining -.74%. On the negative side, Coal, Hospital, Education, Gaming, Construction, Networking, Disk Drive, Paper, Steel, Oil Service, Energy, Oil Tanker, Alt Energy and Utility shares are under meaningful pressure, falling more than -1.50%. Cyclicals and small-caps are underperforming again. Commodity-related stocks have been heavy throughout the day. The UBS-Bloomberg Ag Spot Index is down just -.29%, copper is falling -1.1% and Lumber is falling another -3.47%. Lumber is down about -20.6% in about 2 weeks. The Ag Spot Index is still near levels that sparked the Tunisian riots. The US price for a gallon of gas is up +.03 today to $3.77/gallon. It is up .65/gallon in 55 days. The 10-year TIPS spread is maintaining recent gains despite today's energy price pullback, which is also a large negative. Stocks in China and India reversed opening gains and closed at session lows overnight. I still think investors are underestimating the extent of the inflation problems in many key emerging markets. As well, the Japan nuclear situation remains more tenuous than perceived, in my opinion. The broad US market feels a bit tired and a number of market leaders continue to trade poorly. Trading is sloppy and somewhat random. Given the numerous headwinds, the market still remains extraordinarily resilient, notwithstanding today's losses. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, technical selling, rising Mideast unrest, emerging markets inflation fears, more hawkish fed commentary, profit-taking and Japan concerns.

1 comment:

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