Thursday, June 23, 2011

Stocks Finish Slightly Lower on Global Growth Worries, Emerging Markets Inflation Fears, US Debt Ceiling Concerns, Commodity Sector Weakness

Broad Market Tone:

  • Advance/Decline Line: Slightly Higher
  • Sector Performance: Mixed
  • Volume: About Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 20.12 +8.48%
  • ISE Sentiment Index 86.0 -27.73%
  • Total Put/Call 1.05 +25.0%
  • NYSE Arms 1.48 -10.51%
Credit Investor Angst:
  • North American Investment Grade CDS Index 99.98 +2.98%
  • European Financial Sector CDS Index 126.50 +11.35%
  • Western Europe Sovereign Debt CDS Index 225.83 +2.50%
  • Emerging Market CDS Index 233.35 +3.38%
  • 2-Year Swap Spread 28.0 +2 bp
  • TED Spread 23.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .01% unch.
  • Yield Curve 257.0 -5 bps
  • China Import Iron Ore Spot $170.90/Metric Tonne -.58%
  • Citi US Economic Surprise Index -98.90 -.4 point
  • 10-Year TIPS Spread 2.20% +3 bps
Overseas Futures:
  • Nikkei Futures: Indicating +10 open in Japan
  • DAX Futures: Indicating +58 open in Germany
  • Higher: On gains in my Retail, Biotech, Tech longs and Commodity/Emerging Markets Shorts
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and then added them back
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades substantially off session lows despite rising eurozone debt angst, global growth concerns, emerging market inflation fears, US debt ceiling worries and technical selling. On the positive side, Computer, Semi, Disk Drive, Networking, Wireless, Homebuilding, Retail and Airline shares are especially strong, rising more than +.5%. Tech stocks are sharply outperforming the broad market. Consumer discretionary shares are also displaying big relative strength on the decline in commodities. The Transports are outperforming again. The UBS-Bloomberg Ag Spot Index is dropping -.7%, oil is falling -3.15% and gold is down -1.83%. The Spain sovereign cds is falling -5.75% to 80.67 bps. On the negative side, Oil Tanker, Utility, Energy, Oil Service, Bank, I-Banking and REIT shares are under significant pressure, falling more than -1.5%. Copper is dropping -.9% and lumber is dropping -2.55%. The US price for a gallon of gas is -.02/gallon today to $3.61/gallon. It is up .47/gallon in less than 4 months. The Italy sovereign cds is climbing +9.2% to 197.83 bps, the Belgium sovereign cds is rising +7.81% to 164.83 bps, the UK sovereign cds is rising +3.59% to 67.75 bps, the Ireland sovereign cds is rising +4.87% to 799.35 bps, the Russia sovereign cds is rising +7.76% to 157.33 bps, the Greece sovereign cds is rising +2.5% to 1,974.84 bps and the Portugal sovereign cds is gaining +6.18% to 832.33 bps. Moreover, the Eurzone Investment Grade CDS Index is rising +6.43% to 85.27 bps. The large gain in the Eurozone Financial Sector CDS Index is also a large negative. The AAII % Bulls rose to 37.46 this week, while the % Bears fell to 35.74 bps, which is also a large negative. The market turned around sharply on news that the IMF and EU had agreed to support Greece's proposed austerity measures, which isn't surprising, so the reaction was a big positive. The real test will come next Tuesday when Greece votes on these measures. Market leading growth stocks, such as (AAPL), massively outperformed throughout the day. The large decline in commodities remains a short-term market negative and big long-term positive. (ORCL) is disappointing after the close, which may weigh on tech shares in the morning. If the euro can build on this afternoon's gains tomorrow morning, I suspect we could see another late day equity rally tomorrow. I expect US stocks to trade modestly higher into the close from current levels on falling food/energy prices, short-covering, bargain-hunting, technical buying and a bounce off the lows in the euro.

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