Talking Markets on TV this Week

Tonight I will be on the "Willis Report" at 5:10pm ET on the Fox Business Network talking about today's market sell-off and what it means for individual investors.


I will also be on during the 6-8am ET hour of CNN on Friday morning live from London discussing how the markets are setting up for the last day of the week. I will be there speaking at the World MoneyShow if you happen to be in the area.

Mid-Day Update: France Next? and Top Sectors

With three hours of trading left in the session the major indices are down over 2% - and why??

Well today the answer is Italy. Even though the country has a primary budget surplus (balance before interest payments), they just happen to be next in line to get hammered by bond traders. The yield on the Italian 10-year bonds surged through 7%, the level many view as the threshold of how high rates can go without the country running into trouble making payments.

The elephant in the room was Ireland a couple years ago, then Greece, now Italy, and next is….. France!

Yes, the spread between French and German bonds hit 1.47 percentage points today (an all-time high since the Euro began), well higher than the 0.45 spread last year.

The iShares France ETF ($EWQ) is down 5% and the iShares Italy ETF ($EWI) is losing 8%. The related bond ETFs are also falling, the SPDR International Treasury Bond ETF ($BWX) is down 1.4%.

In the US the hardest hit sector is the Metals & Mining ($XME), down 5%. Even though every entire sector ETFs we follow are negative, the best performers are the Utilities ($XLU) and Consumer Staples ($XLP).

The level to watch on the S&P 500 is 1230-1250 range – and yep it is trading right in there now!!

Pre-Market Update

Stocks are taking a beating this morning one day after rallying 1% on news that Italian PM Berlusconi was stepping down. Today the news out of the country know for wine and food is on the other end of the spectrum. The yield on Italian bonds shoot above the important 7% level as fears of a default spread around the globe. The spread between the Italian bonds and the German bunds is at the highest level since the introduction of the Euro.

First it was Greece, now Italy, could France be next? The spread between the French OATS and German bunds spiked to their highest level post-Euro this morning. Is France really next on the list? Or are investors listening to their emotions and fear versus sanity? I believe the fear has gotten a hold of investors this morning and France just happened to be next on the list. In all seriousness we all know the European nations have issues, but with Italy, Spain, Portugal, Ireland, Greece, etc. already with high yields - France was simply the next victim.

ETFs to Watch: $EWQ $EWI $IEV $EUFN $BWX

My call heading into the open today is not to panic and let the market open lower (currently indicating down over 200 points on the Dow) and see how things look around lunch time.

One bright spot this morning is Gold. The SPDR Gold ETF $GLD is indicating it will open higher by about 0.5% after losing some luster yesterday. Today it is a safe haven play once again.

I will post more updates throughout the day.

Market Recap

Italy Spurs Rally

The rumor that Italy’s Silvio Berlusconi will step down after the country approved a new austerity bill was credited with the mid-day rally in stocks. In a matter of 30 minutes the S&P 500 rallied 15 points (over 1%) to retest the highs from earlier in the session (1271). Earlier this morning the yields on Italian bonds were spiking as fears increased that the country could be Greece 2.0. I beg to differ, but it is tough to argue with the bond traders as they are typically a smart crew – keep in my typically (not all the time).

The markets closed out the day by about 1% and once again the bears went back into hibernation as the news out of Europe continues to improve and the news in the US remains consistent. The US is not showing great signs of growth, but there is growth and after pricing in a recession it means there is still more room ahead for stocks into the end of the year. We will be buyers on most dips in the next coupe of weeks. Stay tuned for stock and ETF ideas!! Earlier today I highlighted the drug and utility sectors.

Oil Futures at Multi-Month High

Oil futures closed higher for the fifth straight session as the rise in the stock market boosted the outlook for the global economic backdrop. There were also heightened concerns about Iran’s nuclear program that added to the buying today. The December futures contract closed up 1.3% to $96.80 per barrel. This is the highest close for the most-active contract since July 28.

Here is a look at how oil-related ETFs have performed so far in the fourth quarter:

• SPDR Energy ETF ($XLU) up 24%
• Global X China Energy ETF ($CHIE) up 18%
• HOLDRS Oil Service ETF ($OIH) up 29%
• United States Oil ETF ($USO) up 23%
• SPDR S&P 500 ETF ($SPY) up 13%
  

The PFG WishList of Stocks

Each day I will go through a bevy of stock and ETF scans to find new ideas and some times eliminate possible buying opportunities. The scans include both fundamental and technical scans and some that combine the two.

As of today the list stand at 122 stocks/ETFs. The list ranges from Apple ($AAPL), which we already own some of, to IQ Global Oil Small-Cap ETF ($IOIL). As a client of PFG you are able to get our WishList at anytime and this is where the majority of stocks/ETFs we buy for clients originate.

To give you a quick peek inside the list, here are a few that are doing well today with the market in the red.

• Cardtronics ($CATM)
• MAKO Surgical ($MAKO)
• British American Tobacco ($BTI)
• Wal-Mart ($WMT)
• Cloud Peak Energy ($CLD)
  

Hedge Funds Lagging the Market

Even though October was the best month of the year for Hedge Funds, they continue to lag behind the overall market. The HFRI Fund Index that tracks over 2000 funds gained 2.4% in October. This may sound like a solid return, but the S&P 500 was up 10.9%. A major lag for managers.

The small gain was a reprieve after a 6.5% decline in the 3rd quarter, the fourth worst in history.

So if you think it has been easy for the "big hedge fund managers", think again. This market has been difficult for everyone involved.

Drugs and Utilities Looking Good

After scanning through the daily WatchList this morning there was a theme that I picked up on early. The stocks that were pulling back to support and had solid long-term trends were coming from two sectors - Drugs and Utilities.

The two drug stocks that were at the top of my list were Allergan ($AGN), the maker of Botox and breast implants and Celgene ($CELG), a biotech firm. The two companies are in healthcare, but are not very similar. But their charts are both very bullish - pulling back to support after hitting recent highs. This is the type of pattern we are looking for in a market that is now trending higher.

The two utility stocks were Nisource ($NI) and Centerpoint Energy ($CNP), both are diversified utility companies. The charts are almost identical to $CELG and $AGN - they are both pulling back from recent highs to support. The bonus with the utility companies is the dividends: $NI pays 4.2% and $CNP 3.9%.

I do own a small position in $AGN for clients and may be looking to add more or invest in some of the others mentioned in this post.