Stocks Lower into Final Hour on Rising Credit Market Angst

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Medical longs, Internet longs and Alternative Energy longs. I added to my (IWM)/(QQQQ) hedges this morning and added to my (EEM) short, thus leaving the Portfolio 50% net long. The overall tone of the market is very bearish as the advance/decline line is substantially lower, every sector is falling and volume is above average. Investor anxiety is very high. Today’s overall market action is very bearish. The VIX is rising 11.0% to a high 27.5. The ISE Sentiment Index is a very low 79.0 and the total put/call is a high 1.28 again today. Finally, the NYSE Arms is a high 1.73. The 10-year swap spread is rising another 3.3 basis points today to 89.63 basis points over Treasuries. It is now at the highest level since July 2001. Moreover, the TED spread is rising again to an elevated 160 basis points. Credit market angst is rising further and remains extraordinarily elevated. Until credit markets begin to stabilize, equities will likely remain under pressure. However, given how oversold the major indices are getting, low valuations, more stimuli is on the horizon and how high bearish sentiment is, I suspect the slightest positive catalyst could send stocks soaring. Nikkei futures indicate a -400 open in Japan and DAX futures indicate a -18 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as Fed rate cut speculation offsets rising credit market angst.

Today's Headlines

Bloomberg:
- Apple Inc.(AAPL) CEO Steve Jobs, seeking to sell 10 million iPhones this year, added business features to woo customers from the BlackBerry and will let outside developers create programs for the handset.
- Federal Reserve Bank of New York President Tim Geithner said the central bank may need to keep interest rates low for a while if financial markets remain under stress and threaten economic growth.
- About 250,000 Americans in dozens of states, including Texas, NY and Florida, may benefit from higher limits on new loans backed by the Federal Housing Administration, a Dept. of Housing and Urban Development said.
- Wal-Mart Stores(WMT) said February sales increased 2.6%, exceeding its forecast, after price cuts spurred demand for groceries, medicines and flat-screen televisions.
- Joy Global(JOYG) rose the most in more than two months in New York trading after it lifted its 2008 forecasts and first-quarter earnings topped analysts’ estimates.
- Addax Petroleum Corp., the Swiss producer with a focus on Africa and the Middle East, said a well drilled in Iraq’s Kurdistan yielded “very high” flows of oil.
- General Electric(GE) said it won its second contract with Chicago-based Invenergy Wind LLC for wind turbines valued at about $1 billion.

Wall Street Journal:
- Investor Wilbur Ross has purchased $1 billion of beaten-down municipal bonds, a sign that some large investors are snapping up there investments after a recent selloff, taking advantage of the woes of a number of hedge funds that have been forced to sell to try to stay afloat.
- Money-market funds are emerging as a potential white knight for some troubled auction-rate securities.
- Apple’s(AAPL) Time Capsule Gives You Easy Way To Back Up Wirelessly.

NY Times:
- Bliin, BuzzCity Pte. and other mobile social networking startups are developing applications to capture the 3.3 billion mobile phone users in the world.

BusinessWeek:
- Hedge Funds Frozen Shut. To buy time and stave off losses, more funds are blocking withdrawals.

AP:
- American men have doubled the amount of time they spend on housework sine the 1960s to compensate for chores left unattended as more women joined the workforce, citing a study.

Reuters:
- Some 2,000 US soldiers are being withdrawn from Baghdad as part of a planned reduction of US forces in Iraq.

Jerusalem Post:
- Poll: Most Israelis believe Clinton best for Israel. More than 60% said they would prefer Clinton over her rival Barack Obama for the Democratic candidacy, while only 16% said they wanted Obama to emerge victorius.

Bear Radar

Style Underperformer:

Mid-cap Value -2.33%

Sector Underperformers:

Airlines (-5.25%), Homebuilders (-4.15%) and Retail (-3.98%)

Stocks Falling on Unusual Volume:

SJW, TONE, UDRL, OMRI, TWGP, CPHL, ATHN, PETM, ZUMZ, QSFT, CROX, BRKR, NLY, PBT, TCN, LDG and PAY

Jobless Claims Fall, Pending Home Sales Above Estimates

- Initial Jobless Claims for this week fell to 351K versus estimates of 360K and 375K the prior week.

- Continuing Claims rose to 2831K versus estimates of 2810K and 2802K prior.

- Pending Home Sales for January were unch. versus estimates of a 1.0% decline and an upwardly revised 1.2% decline in December.

BOTTOM LINE: The number of Americans filing first-time claims for unemployment benefits declined more than forecast last week to a six-week low, Bloomberg reported. The four-week moving average of initial claims fell to 359,500 from 361,000 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, remained steady at a historically low 2.1%. Challenger job cuts, reported yesterday, were down 14.2% year-over-year in February. Jobless Claims are still not at levels indicating a US I expect the job market to improve to more healthy levels in the second half of the year. economic contraction.

The number of Americans signing contracts to buy previously owned homes was unchanged in January, Bloomberg reported. Pending resales fell 6.1% in the South and 4.1% in the Northeast. They soared 13% in the West and rose .6% in the Midwest. Fed fund futures now imply a 78.0% chance for a 75 basis point cut at the upcoming Fed meeting, up from 54.0% yesterday. I still expect home sales to beat expectations this spring on pent-up demand, lower prices and lower mortgage rates.

Bull Radar

Style Outperformer:

Large-cap Growth (-.39%)

Sector Outperformers:

Oil Service (+.41%), Construction (+.28%) and Software (-.12%)

Stocks Rising on Unusual Volume:

ORCL, MDR, DDS, BBL, BHP, WMT, CNSL, PGI, SU, FHN, PCZ, TSRA, PDLI, MATK, DXPE, CMTL, JOYG, MELI, CSIQ, BRLI, NUVA, ALOG, GOLD, HWAY, FWRD, BUCY, RAVN, HMSY, CSGS, PBT, TCN, HL and EVY

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