Wednesday, May 04, 2011

Stocks Lower into Final Hour on Emerging Markets Inflation Fears, Global Growth Concerns, Profit-Taking, More Shorting


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Slightly Above Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 17.04 +2.04%
  • ISE Sentiment Index 101.0 unch.
  • Total Put/Call 1.04 +15.56%
  • NYSE Arms 1.48 +74.15%
Credit Investor Angst:
  • North American Investment Grade CDS Index 89.93 +1.31%
  • European Financial Sector CDS Index 84.75 -.94%
  • Western Europe Sovereign Debt CDS Index 185.91 -1.31%
  • Emerging Market CDS Index 201.95 +.68%
  • 2-Year Swap Spread 17.0 -1 bp
  • TED Spread 26.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .02% unch.
  • Yield Curve 263.0 -2 bps
  • China Import Iron Ore Spot $183.30/Metric Tonne +.38%
  • Citi US Economic Surprise Index -20.3 -13.6 points
  • 10-Year TIPS Spread 2.55% unch.
Overseas Futures:
  • Nikkei Futures: Indicating -164 open in Japan
  • DAX Futures: Indicating +33 open in Germany
Portfolio:
  • Slightly Higher: On gains in my Tech/Retail sector longs, ETF hedges and emerging market shorts
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and then covered some of them
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades well off session lows despite sharp losses overseas, emerging market inflation fears, global growth concerns and commodity sector weakness. On the positive side, Internet, Computer, Semi, Drug and Restaurant shares are higher on the day. The UBS-Bloomberg Ag Spot Index is falling -1.56%, gold is down -1.48% and oil is dropping -1.88%. Silver is down about -20% in 5 days. The 10-year yield is falling -3 bps to 3.22%. The Portugal sovereign cds is falling -4.54% to 621.70 bps, the Greece sovereign cds is declining -4.07% to 1,285.02 bps and the Ireland sovereign cds is down -3.29% to 640.55 bps. On the negative side, Coal, Alt Energy, Energy, Ag, Steel, Paper, Networking, Construction and Road & Rail shares are under significant pressure, falling more than -1.75%. Small-caps and cyclicals are underperforming again. Commodity-related equities have traded very heavy throughout the day again despite a stable euro. The US price for a gallon of gas is rising .01/gallon today to $3.98/gallon. It is up .86/gallon in 78 days. Lumber is falling another -2.11% and has plunged around -27.0% in just over 2 months. Copper is dropping -2.81%. The US dollar continues to trade very poorly. The Japan sovereign cds is rising +2.76% to 80.84 bps and the US Muni CDS Index is gaining +2.79% to 125.91 bps. The sectors that are the most sensitive to global growth are getting hit the hardest again. I continue to believe the global economy is slowing more than economists expect on soaring food/energy prices, US housing, European austerity, central bank tightening in emerging markets and the Japan nuclear crisis. Some market leading stocks are trading very well in the face of recent weakness, which is a large positive. I expect US stocks to trade mixed-to-lower into the close from current levels on profit taking, more shorting, technical selling, global growth concerns, Mideast unrest and emerging markets inflation fears.

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