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Monday Morning Musings

Stocks are mostly lower out of the gate this morning. Not any real catalysts. One theory for the selling in tech stocks is big funds making room for the Alibaba IPO. Not sure how much water that holds, but smaller growth stocks are taking it on the chin a bit so far. But we still have a lot of time left today.

Another reason could be the disappointing data out of China. Industrial production grew +6.9%, but that is the slowest pace since Dec. 2008. Moreover, electricity production declined for the first time since 2009. Electricity production is closely watched because many feel those numbers can't be massaged by govt data collectors.

Here in the US, the Empire Manufacturing Survey beat estimates and came in at 27.5, up strongly from last month's reading of 14.7.

On the geopolitical front, Russia sent a second aid convoy into Ukraine without clearance from the Ukraine govt. Considering the potential cease-fire that has been offered, these actions seem a little odd.

The 10-year yield got a big boost last week and rallied up to the 2.60% level. That spooked income investors and caused a sharp selloff in things like REITs, MLPs, etc. So it bears monitoring if yields continue to rise or settle down following the brief spike.

And the volatility index is up another 6% to the 14.15 level. In August we saw the VIX spike up to the 17 level, so if the selling in stocks persists we could see the VIX more higher again.

Trading comment: Lots of cross-currents in the market. The major indexes are still above their 50-day averages, but the small-cap (NYSEARCA:IWM) has broken below its 50-day, and so has the emerging market index. Combined with the selling in growth stocks, it appears that the market may need a bit more of a pause. We would wait a few days to see if the selling picks up steam or settles down, but we would still view any pullback as a buying opportunity at this point.