Monday, June 06, 2011

Stocks Falling into Final Hour on Global Growth Worries, Financial Sector Weakness, Eurozone Debt Angst, Rising Mideast Unrest

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 18.27 +1.78%
  • ISE Sentiment Index 102.0 -8.93%
  • Total Put/Call 1.07 -13.01%
  • NYSE Arms 2.57 +67.98%
Credit Investor Angst:
  • North American Investment Grade CDS Index 94.27 -.15%
  • European Financial Sector CDS Index 107.83 -.60%
  • Western Europe Sovereign Debt CDS Index 188.58 -1.05%
  • Emerging Market CDS Index 220.80 +1.13%
  • 2-Year Swap Spread 20.0 unch.
  • TED Spread 23.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .02% -1 bp
  • Yield Curve 257.0 +1 bp
  • China Import Iron Ore Spot $170.20/Metric Tonne unch.
  • Citi US Economic Surprise Index -112.70 +4.5 points
  • 10-Year TIPS Spread 2.23% unch.
Overseas Futures:
  • Nikkei Futures: Indicating -50 open in Japan
  • DAX Futures: Indicating -30 open in Germany
  • Slightly Lower: On losses in my Tech, Retail, Medical and Biotech sector longs
  • Disclosed Trades: None
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades near session lows, breaking technical support at 1,300, on global growth worries, emerging markets inflation fears, rising Mideast unrest, Japan nuclear concerns, eurozone debt angst and financial sector weakness. On the positive side, Oil Tanker and Restaurant shares are higher on the day. Oil is falling -1.9% and the UBS-Bloomberg Ag Spot Index is dropping -2.0%. The Russia sovereign cds is falling -1.95% to 135.0 bps and the Hungary sovereign cds is falling -2.06% to 237.69 bps. On the negative side, Airline, Education, Gaming, Tobacco, Homebuilders, Construction, HMO, Hospital, Biotech, I-Banks, Banks, Disk Drives, Steel, Oil Service, Energy, Alt Energy and Coal shares are under significant pressure, falling more than -2.0%. Small-cap and cyclical stocks are underperforming again. (XLF)/(IYR) are also underperforming. Transport shares have also been heavy throughout the day. Lumber is falling -1.63% and has plunged -37.0% since January 4th. The US price for a gallon of gas is down -.02/gallon today to $3.77/gallon. It is up .63/gallon in less than 4 months. The Spain sovereign cds is rising +1.05% to 239.63 bps, the Italy sovereign cds is gaining +2.46% to 148.67 bps, the Portugal sovereign cds is rising +1.33% to 674.07 bps, the Greece sovereign cds is rising +1.53% to 1,395.96 bps, the Ireland sovereign cds is gaining +1.14% to 649.10 bps, the Brazil sovereign cds is rising +1.25% to 109.35 bps and the UK sovereign cds is rising +2.07% to 56.19 bps. The Citi Latin America Economic Surprise Index is falling another -4.9 points today to -31.60. Brazil's Bovespa is falling -2.0% today to session lows and is down -9.0% ytd, while it looks like it is rolling over again technically. The Nikkei also looks to be rolling over again. Oil is being propped up by rising Mideast unrest and US dollar weakness. Unless there is another spike in violence that actually threatens production or another unlikely euro surge very soon, I suspect oil is about to take another dive lower, which would be a longer-term positive. The broad market is worse today than the major averages suggest. A test of DJIA 12,000 is likely over the coming days. I expect US stocks to trade modestly lower into the close from current levels on global growth worries, rising eurozone debt concerns, emerging markets inflation fears, rising Mideast unrest, financial sector weakness, technical selling and more shorting.

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