Monday, December 19, 2011

Stocks Dropping into Final Hour on Rising Eurozone Debt Angst, Financial/Tech Sector Pessimism, Global Growth Fears, Technical Selling


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Light
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 24.53 +.99%
  • ISE Sentiment Index 123.0 +12.84%
  • Total Put/Call .86 -28.33%
  • NYSE Arms 1.88 +128.67%
Credit Investor Angst:
  • North American Investment Grade CDS Index 130.98 +1.78%
  • European Financial Sector CDS Index 303.43 +1.33%
  • Western Europe Sovereign Debt CDS Index 378.20 -.22%
  • Emerging Market CDS Index 317.70 +1.51%
  • 2-Year Swap Spread 50.0 +1 bp
  • TED Spread 57.0 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -115.25 +6.5 bps
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 158.0 -4 bps
  • China Import Iron Ore Spot $131.30/Metric Tonne -.61%
  • Citi US Economic Surprise Index 73.40 -2.1 points
  • 10-Year TIPS Spread 1.93 +2 bps
Overseas Futures:
  • Nikkei Futures: Indicating -9 open in Japan
  • DAX Futures: Indicating -39 open in Germany
Portfolio:
  • Slightly Higher: On gains in my index hedges and emerging markets shorts
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and then covered some of them
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 moves further below its 50-day moving average and trades to session lows on rising Eurozone debt angst, rising global growth fears, technical selling and tech/financial sector pessimism. On the positive side, Drug and Tobacco shares are slightly higher today. Lumber is up +1.9% and Oil is falling -.39%. The Spain sovereign cds is down -2.04% to 411.17 bps. On the negative side, Coal, Alt Energy, Oil Tanker, Oil Service, Steel, Software, Semi, Disk Drive, Networking, Bank, I-Bank, Construction, Homebuilding and Airline shares are under meaningful pressure, falling more than -2.0%. (XLK) and (XLF) have traded poorly throughout the day. The UBS-Bloomberg Ag Spot Index is up +1.1%. The 10-year yield is falling -4 bps to 1.81% despite recent better economic data and equity strength. The Brazil sovereign cds is jumping +2.78% to 164.0 bps, the Belgium sovereign cds is gaining +1.33% to 325.83 bps, the Japan sovereign cds is rising +1.73% to 137.05 bps, the France sovereign cds is gaining +.74% to 229.33 bps and the Germany sovereign cds is rising +.6% to 106.83 bps. The Italian/German 10Y Yield Spread is surging +4.55% to 495.60 bps. The Western Europe Sovereign CDS Index is still very near its all-time high. The TED spread continues to trend higher and is at the highest since May 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is very near the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is rising +5.25% to -11535 bps, which is back to mid-Nov. levels. The Libor-OIS spread is rising to the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. China Iron Ore Spot has plunged -31.6% since February 16th and -27.5% since Sept. 7th. The China Corporate Blended Spread Index remains very close to another technical breakout. The Citi Asia-Pacific Economic Surprise Index is falling another -2.6 points today to -27.70, which is the lowest level since April 2009. Asian equities continue to trade very poorly with most down around -2% before the North Korea news last night. Their averages cut losses into the closes after the initial swoon on the news. Taiwan shares closed down another -2.2%(down -26.07% ytd) and are at the lowest levels since July 2009. Brazil's Bovespa fell another -1.42% today and is down -20.2% ytd. Fears over the possibility of hard landings in some key emerging market economies appear to be intensifying again. Moreover, European credit gauges are still performing very poorly given that the European debt crisis “can-kicking” solution is supposedly at hand, which remains a large red flag. Tech share technical action is also troubling as the MS Tech Index is now down -12.63% ytd. Equity trading still maintains an overall complacent feel, given the still developing significant macro headwinds. This is likely due to year-end window-dressing and seasonality. A significant positive catalyst needs to emerge very soon to prevent more equity weakness during 1Q, in my opinion. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, rising global growth fears, tech/financial sector pessimism, technical selling and more shorting.

1 comment:

theyenguy said...

The linked chart of the S&P 500 large caps, $SPX, traded by SPY, shows a fall for a second week in a row today Monday December 19, 2011. Witney Kisling of Bloomberg provides a bearish report on the S&P. The SPX fell 2.8 percent to 1,219.66 last week, the first decline since November. Concern that countries in Europe face defaults pushed the index down 11 percent since it reached an almost three-year high of 1,363.61 on April 29. While the index has lost 3 percent for 2011, it has swung from an 8.4 percent gain in April to a 13 percent loss in October. The S&P 500 slumped 1.2 percent today. DirecTV, DTV, the largest U.S. satellite-television provider, bought back $1.45 billion of shares in the third quarter, part of a $6 billion program announced in February. Reynolds boosted its quarterly dividend payout twice in 2011. The companies rallied 5.4 percent and 25 percent, respectively. The S&P 500 is trading at 12.3 times estimated 2011 earnings, or 30 percent below its 10-year average price-earnings ratio, data compiled by Bloomberg show. More than 1,000 U.S. companies authorized buybacks this year, according to Birinyi Associates Inc. At $520 billion announced through last week, 2011 is on track for the third-biggest year for repurchases on record, the data show. “Companies that are just building cash, they’re looked at as not taking any risk,” Eric Green, a Philadelphia-based fund manager at Penn Capital Management, which oversees about $6 billion, said in a telephone interview Dec. 15. Looks to like there will be no gift from Santa Clause to investors this year.