Stocks Dropping into Final Hour on Rising Eurozone Debt Angst, Some Key Earnings Disappointments, Rising Global Growth Fears

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.30 -.87%
  
• ISE Sentiment Index 130.0 +38.30%
  
• Total Put/Call .98 +15.29%
  
• NYSE Arms .91 +107.89%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 99.35 +.87%
  
• European Financial Sector CDS Index 250.03 +2.61%
  
• Western Europe Sovereign Debt CDS Index 279.90 +.39%
  
• Emerging Market CDS Index 269.29 +2.13%
  
• 2-Year Swap Spread 29.25 +.75 basis point
  
• TED Spread 40.0 +1.0 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -49.0 +3.0 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .07% -1 basis point
  
• Yield Curve 171.0 -2 basis points
  
• China Import Iron Ore Spot $148.50/Metric Tonne -.47%
  
• Citi US Economic Surprise Index 9.0 -.2 point
  
• 10-Year TIPS Spread 2.27 -4 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -31 open in Japan
• DAX Futures: Indicating +13 open in Germany
  

Portfolio:

• Higher: On gains in my Technology and Medical sector 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 bearish, as the S&P 500 trades lower on rising Eurozone debt angst, some key earnings disappointments, rising global growth fears, less financial sector optimism and less US economic optimism. On the positive side, Oil Service, Computer Hardware and Restaurant shares are especially strong, rising more than +.75%. Tech shares are outperforming. Oil is falling -1.5%, Lumber is rising +1.9%, Gold is down -.64% and the UBS-Bloomberg Ag Spot Index is down -1.1%. Major Asian indices rose around +1.25% overnight, led by a +2.1% gain in Japan. On the negative side, Coal, Alt Energy, Oil Tanker, Networking, Computer Service, Insurance and Homebuilding shares are under pressure, falling more than -1.0%. Small-caps are underperforming. Financial are also relatively weak. Copper is dropping -.42%. Major European indices are falling around -2.25% today, led lower by a -4.0% decline in Spain. Spain is now down -17.4% ytd and very close to its March 2009 low. The Bloomberg European Bank/Financial Services Index is falling another -2.2% and is down -14.9% in less than one month. The Germany sovereign cds is gaining +1.09% to 78.68 bps(+7% in 5 days), the France sovereign cds is jumping +5.2% to 200.5 bps(+7.5% in 5 days), the Italy sovereign cds is gaining +2.0% to 441.0 bps and the Spain sovereign cds is gaining +1.2% to 495.0 bps. Moreover, the European Investment Grade CDS Index is rising +4.1% to 142.60 bps. US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak despite investor perceptions that the US economy is accelerating. Moreover, the Citi US Economic Surprise Index has fallen back to mid-Oct. levels. Lumber is -9.0% since its Dec. 29th high despite the better US economic data, improving sentiment towards homebuilders and the broad equity rally. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -55.0% from its Oct. 14th high and is now down around -40.0% ytd. China Iron Ore Spot has plunged -18.0% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +760.0% ytd. China's March copper imports fell -4.6% on the month. Singapore Electronics exports decelerated to a gain of +2.8% in March from a +23.3% gain in February. The MBA Home Purchase Apps Index plunged -11.2% this week. This index is now back in the middle of the range it has been trapped in since May 2010. This week’s decline is one of the biggest during this period, as well. I continue to believe that nationwide housing, while stabilizing, is nowhere near in the vigorous recovery that many perceive. The recent erratic technical action in shares of (AAPL), a market-leader and the largest company in the world, is a bit disconcerting. Long AAPL. Copper still trades poorly, bonds still trade too well and the euro can’t sustain a bounce. As well, the ongoing rises in German/French cds are also red flags. In my opinion, the still persistent aggressive dip buying in US equities on any swoon indicates a fairly high level of complacency regarding the rapidly deteriorating situation in Europe. For the recent equity advance to regain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, less US economic optimism, less financial sector optimism, rising global growth fears and some key earnings disappointments.