Brazil Tax Hike Adds to China Pressure

Stocks off the lows, but dollar strength is a significant headwind for stocks today. Industrials, energy, commodities selling off on the back of China's rate raise.

Also a factor: Brazil hiked taxes on foreign investment fixed income to 6 percent from 4 percent in a continuing attempt to slow foreign investment.

The iShares Emerging Market Index is down 2 percent, its worst showing in a couple months.

In theory, a China tightening move is not a bad thing. They are trying to combat inflation, and are trying to manage a GDP that could grow 9 percent or more this year.

No matter: the most crowded trade today is short dollar/long commodities/long commodity & big international stocks. When you get a trade that is that lopsided, any sign of slower growth in the key emerging market country will cause immediate profit taking.

Stocks have additional headwinds. Don't blame it all on China: S&P futures were already down before China raised rates about 7am ET this morning.

Two issues:

1) the headwind from perceived QE2 is abating, and

2) the whole world has been hiding in Apple and IBM ). Guidance needed to be titantic to keep those stocks going; IBM raised 2010 guidance but only a small amount, and Apple's disappointing iPad sales were all anyone needed to take profits — up 25 percent in two months? Puh-lease.

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