Friday, April 29, 2011

Stocks Slightly Higher into Final Hour on Earnings Optimism, Buyout Speculation, Technical Buying, Lower Long-Term Rates

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 14.82 +1.37%
  • ISE Sentiment Index 76.0 -33.2%
  • Total Put/Call .88 +7.32%
  • NYSE Arms 1.20 +21.0%
Credit Investor Angst:
  • North American Investment Grade CDS Index 88.55 -2.15%
  • European Financial Sector CDS Index 86.55 +1.61%
  • Western Europe Sovereign Debt CDS Index 187.25 -1.06%
  • Emerging Market CDS Index 199.33 -2.20%
  • 2-Year Swap Spread 17.0 +1 bp
  • TED Spread 24.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .04% unch.
  • Yield Curve 268.0 -1 bp
  • China Import Iron Ore Spot $181.50/Metric Tonne n/a
  • Citi US Economic Surprise Index 1.0 -2.5 points
  • 10-Year TIPS Spread 2.57% +1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +85 open in Japan
  • DAX Futures: Indicating +28 open in Germany
  • Higher: On gains in my Medical and Tech sector longs
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher, despite some disappointing economic data, tech sector weakness, emerging markets inflation worries, rising food/energy prices and Mideast unrest. On the positive side, Airline, Homebuilding, Construction, Computer Service, Ag, Energy, Al Energy, Coal and Defense shares are especially strong, rising more than +1.0%. Cyclical and small-cap shares are outperforming again. Lumber is rising +2.64%. The 10-year yield is falling -3 bps to 3.28%. The Spain sovereign cds is falling -2.21% to 236.88 bps, the Greece sovereign cds is falling -3.58% to 1,350.38, the Israeli sovereign cds is falling -4.05% to 135.17 bps and the Saudi sovereign cds is declining -3.1% to 111.25 bps. Moreover, the US Muni CDS Index is dropping -3.81% to 135.57 bps. On the negative side, REIT, Biotech and Software shares are under pressure, falling more than -.75%. The US price for a gallon of gas is rising .02/gallon today to $3.91/gallon. It is up .79/gallon in 73 days. Gold is jumping 1.6%, Oil is rising +.7%, the UBS-Bloomberg Ag Spot Index is gaining +2.0% and Copper is falling -1.74%. Rice futures are breaking out technically. The US dollar continues to trade very poorly. One of my longs, (AAPL), is surging today on positive news out of Asia on sales of the white iPhone and iPad 2 as the negative effects of the Nasdaq 100 re-weighting fade. As well, RIM's poor results help. I still think (AAPL) is absurdly undervalued at 14.3x very conservative forward estimates. The broad US stock market continues to trade very well. After a brief pause early next week, further gains are likely. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, earnings optimism, buyout speculation, investor performance angst, lower long-term rates and technical buying.

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