Friday, June 24, 2011

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Tech Sector Earnings, Global Growth Worries, Emerging Markets Inflation Fears

Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: About Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 21.05 +9.12%
  • ISE Sentiment Index 97.0 +11.0%
  • Total Put/Call 1.08 +4.95%
  • NYSE Arms 2.16 +58.80%
Credit Investor Angst:
  • North American Investment Grade CDS Index 100.03 +.05%
  • European Financial Sector CDS Index 130.67 +5.38%
  • Western Europe Sovereign Debt CDS Index 235.83 +4.43%
  • Emerging Market CDS Index 234.35 +1.36%
  • 2-Year Swap Spread 29.0 +1 bp
  • TED Spread 24.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .00% -1 bp
  • Yield Curve 253.0 -4 bps
  • China Import Iron Ore Spot $168.70/Metric Tonne -1.29%
  • Citi US Economic Surprise Index -97.90 +1.0 point
  • 10-Year TIPS Spread 2.20% unch.
Overseas Futures:
  • Nikkei Futures: Indicating -60 open in Japan
  • DAX Futures: Indicating +19 open in Germany
  • Slightly Lower: On losses in my Retail, Biotech and Tech longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
  • Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades back down to its 200-day moving average on rising eurozone debt angst, global growth concerns, emerging market inflation fears, US debt ceiling worries and technical selling. On the positive side, Education, Ag, REIT and Restaurant shares are relatively strong, falling less than -.5%. The UBS-Bloomberg Ag Spot Index is dropping -.50%, oil is falling -.7%, lumber is up +.5%, copper is rising +1.3% and gold is down -1.5%. On the negative side, Airline, Retail, Hospital, Networking, Disk Drive, Computer, Software, Internet, Oil Service and Oil Tanker shares are under significant pressure, falling more than -2.0%. The US price for a gallon of gas is -.01/gallon today to $3.60/gallon. It is up .46/gallon in less than 4 months. China's Iron Ore Spot Index is on the verge of a technical breakdown. The Italy sovereign cds is climbing +3.37% to 203.67 bps, the Belgium sovereign cds is rising +4.53% to 171.50 bps, the Russia sovereign cds is rising +2.62% to 161.50 bps and the Greece sovereign cds is rising +10.55% to 2,184.99 bps. The large gain in the Eurozone Financial Sector CDS Index remains a large negative. As well, the Western Europe Sovereign CDS Index is making another record high. The Emerging Markets Sovereign CDS Index is soaring +10.9% today to 188.92 bps. Finally, the Greece sovereign cds is making another new record high. Analysts' S&P 500 earnings estimates haven't come in at all, which is of concern considering the large slowdown in global growth and stocks' negative reactions to earnings misses. The fact that the S&P 500 is just hovering around its 200-day moving average without bouncing meaningfully is usually a bad indication. Moreover, the fact that eurozone cds are moving meaningfully higher today despite the positive rhetoric regarding the situation coming from eurozone leaders is a large negative. It appears as though investor worries over contagion are intensifying. I expect US stocks to trade mixed-to-lower on rising eurozone debt angst, global growth worries, emerging market inflation fears, technical selling and tech sector weakness.

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