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Wall Street's Bearish 'Pain' Trade: 'Nobody' Owns Stocks

Global markets are up on: 1) a leaked report that Chinese exports grew 50 percent in May from a year earlier, much higher than the 32 percent gain expected (official numbers due out tomorrow); and 2) a successful 3 and 10 year bond auction in Portugal. Portugal sold 10-year bonds at a 5.23 percent yield. That's higher than the 4.52 yield they paid previously.

In China, the Shanghai Index was up 2.8 percent on the strong export numbers.

A third factor helping markets is the greatly oversold condition of stocks. "The pain trade is higher — nobody owns any stock," one trader told me this morning.

Reflecting that bearish sentiment, the weekly Investors Intelligence poll of financial newsletter writers showed bears at 31.9 percent (up from 28.4 percent last week), the highest bearish levels since July 2009. Bulls dropped to 38.5 percent, from 39.8 percent the week before.

Elsewhere:

1) In an interesting acquisition, Spain's largest bank, Banco Santander , is buying its remaining interest in their Mexican banking operation from Bank of America . BAC owns a 24.9 percent stake in Santander's Mexican unit, but STD is buying it back for $2.5 billion.

The deal will be immediately accretive to earnings. This is a vote of confidence in an improving Mexican economy; indeed in an improving Latin American economy.

2) Texas Instruments is up 2 percent after an optimistic mid-quarter update. Encouraging for the tech giant: strong demand for its chips. The company also said that demand in Europe hasn't suffered despite the recent economic and currency concerns in that region.

As a result, the chipmaker said both earnings and revenues for the quarter will be at the high end of its previous forecast, with earnings likely coming in at or above current Street estimates.

3) Potash rises 2 percent after being upgraded to "buy" by UBS. The brokerage expects the fertilizer company to benefit from higher production and also higher prices. UBS also ups the company's 2011 earnings forecast and its price target.

4) Still no pickup in home buying post-tax credit. The Mortgage Bankers Association (MBA) reported continued weakness in mortgage applications for home purchases in the latest week. The Association revealed its purchasing applications index fell 5.7 percent. That was its fifth consecutive week of declines, extending its slump following the expiration of the Federal home buyer's tax credit. The MBA index is at its lowest levels since February 1997, with the number of applications down 35 percent just in the past month alone.

While mortgage rates remained below 5 percent, refinancings also fell 14.3 percent in the past week.

5) There has been a dearth of news on the financial reform bill, but that is now changing. Chairman Barney Frank says conference work will begin Thursday; the plan is to be finished by June 26th and have the president sign by the 4th of July.

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