Economist Michael Darda over at MKM Partners attempts to ruin my weekend with this observation:
Swap spreads (simple version: the difference between interest rate on private and government debt) officially re-entered "crisis territory" today (which we view as 75-80 [basis points] or more). This indicator has tended to lead other areas of credit over time, including during the summer and fall of 2007. Our bullish view of stocks had been built around the previous narrowing in swap spreads (and the parallel improvement in the commercial paper market), attractive relative valuations, and very bearish investor sentiment (a contrary indicator). While we remain constructive on stocks long-term, the recent aggressive widening in swap spreads—and the renewed weakness in the commercial paper market—are a significant setback that may signal more near-term equity market weakness to come.