Thursday, June 30, 2011

Stocks Higher into Final Hour on Less Eurozone Debt Angst, Better Economic Data, Window Dressing, Short-Covering

Broad Market Tone:

  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Most Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 16.49 -4.52%
  • ISE Sentiment Index 73.0 +2.3%
  • Total Put/Call .92 -8.91%
  • NYSE Arms .90 +68.32%
Credit Investor Angst:
  • North American Investment Grade CDS Index 92.73 -3.67%
  • European Financial Sector CDS Index 107.0 -11.21%
  • Western Europe Sovereign Debt CDS Index 228.83 -2.28%
  • Emerging Market CDS Index 212.39 -2.83%
  • 2-Year Swap Spread 24.0 unch.
  • TED Spread 23.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .01% unch.
  • Yield Curve 270.0 +5 bps
  • China Import Iron Ore Spot $166.80/Metric Tonne unch.
  • Citi US Economic Surprise Index -93.60 +6.6 points
  • 10-Year TIPS Spread 2.39% +1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +100 open in Japan
  • DAX Futures: Indicating +21 open in Germany
  • Higher: On gains in my Retail, Biotech, Medical and Tech longs
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 moves slightly above its 50-day moving average on diminishing eurozone debt angst, better economic data, window dressing, short-covering, technical buying and lower food prices. On the positive side, Education, Construction, Disk Drive, Semi, Computer, Oil Service, Wireless, Road & Rail, Paper and Alt Energy shares are especially strong, rising more than +1.75%. Cyclicals are outperforming. Tech shares have strongly outperformed throughout the day. The 10-year yield is rising +6 bps to 3.17%. Copper is rising +1.2%, gold is down -.6%, the UBS-Bloomberg Ag Spot Index is down -2.84% and Lumber is jumping +4.2%. The Spain sovereign cds is falling -3.8% to 269.74 bps, the Greece sovereign cds is down -4.79% to 1,960.16 bps, the Russia sovereign cds is down -4.47% to 142.33 bps, the Belgium sovereign cds is down -5.51% to 142.86 bps, the Brazil sovereign cds is down -4.09% to 110.18 bps and the UK sovereign cds is down -4.3% to 60.75 bps. On the negative side, Oil Tanker, HMO and Homebuilding shares are lower on the day. (XLF)/(IYR) have underperformed throughout the day. Rice futures are jumping +4.7% despite the overall weakness in ag commodities. The US price for a gallon of gas is unch. today at $3.54/gallon. It is up .40/gallon in less than 5 months. The Emerging Markets Sovereign CDS Index is up +1.1% to 179.87 bps, the Portugal sovereign cds is up +1.87% to 781.32 bps and the Italy sovereign cds is up +.64% to 178.83 bps. Despite the global equity rally, Brazil's Bovespa was flat again today and is down -10.2% ytd. European contagion fears are temporarily subsiding again. The tone and breadth of the rally are improved today, however the lack of participation by the financial/real estate stocks is a concern. Stocks are now short-term overbought. The upcoming earnings season will provide the next big test as earnings estimates remain high even as global growth has decelerated meaningfully. As well, emerging markets inflation fears are likely to remain. I expect US stocks to trade mixed-to-higher from current levels into the close on short-covering, quarter-end window dressing, better economic data, lower food prices, diminishing eurozone debt angst, less tech sector pessimism and technical buying.

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