Flight-to-Safety Trade Coming Off

The markets are higher in early trading, though off of their opening highs. Although Asian markets got clobbered overnight, Europe is higher this morning after a successful bond auction was held in Italy.

Italy held an auction of 12-month bills which was successful although they did carry a yield above 6.0%. The yield on their longer-term notes has fallen back below the 7.0% level, which the market is breathing a small sigh of relief over as well. In Greece, a new PM has been named.

In corporate news, tech bellwether Cisco (CSCO) reported an upside surprise and the stock is nicely higher. But AAPL is lagging and weighing on the Nasdaq, which is underperforming the S&P 500 so far.

In economic news, jobless claims were better than expected falling below the key 400k level to 390,000. The trade deficit also came in lower than expected (which is a boost to GDP).

The euro is bouncing a bit, which is helping some commodities. Oil prices are higher to 96.52, but gold prices are down big back near $1741.

Gold has benefited from the flight-to-safety trade of late. So have Treasury securities, with yields moving back below 2.00% on the 10-year. But today, the flight-to-safety trade is coming off a bit with gold selling off, bonds moving lower, and the dollar under a little pressure as well.

Trading comment: The Nasdaq is heavy today with growth stocks lagging the market. Yesterday's outsized selloff was a surprise to most people, as it was certainly a delayed reaction to the rise in Italy's bond yields and the concerns over European sovereign debt. Bond yields are beginning to rise in France too, so it doesn't look like this episode is about to go away very quickly. The troika needs to step up quick with the bazooka, or markets could grow increasingly spooked. I want to be bullish here, but I can't ignore the gravity of the situation in Europe, so I am keeping things small and balanced for the time being.

long AAPL