U.S. Market Update
Dow -195 S&P -29 NASDAQ -75
U.S. equity markets retreat after another slew of earnings reports and a new gloomy snapshot of the housing market. AMZN -15% is weighing on the NASDAQ as traders fret over the guidance the company gave regarding operating margins. BRCM is down closer to 17% weighing on the SOX -4.5%. Boeing initially opened higher but has since given back more than a $1 post results. After opening underwater, Indices made a second leg lower after Sept existing home sales were reported at the lowest level in 10-years with continued rising inventories and declining prices. Home building stocks are down roughly 2-3% across the board. Financial stocks are at or near session lows as well as comments trickle out of the Merrill Lynch earnings conference call highlighting their announced $8B write down. These headlines have confirmed the very cautious tone in lending markets and spurred speculation that Lehman Brothers could be set to announce another large write down. U.S. Treasury markets have broken to the upside on the latest batch of equity weakness. The 10-year note future is up more than half a point and the Benchmark yield has slipped to 4.33%. The Nov Fed Fund Future contract fully prices in a 25bp cut next week and is beginning to put odds on 50bp. The Jan contract sees more than an 80% chance of a 4.25% fed funds rate by year-end. Oil futures rallied hard after weekly inventory data showed draws across all products. Crude, Distillates, and gasoline futures are each up close to 1.5%. Copper futures are making new 1-month lows down 2.2%.
The major currency pairs maintained their recent trading ranges for the month of October despite confirmation that Turkey has launched some military operations into northern Iraq to curb PKK rebel activities. In EUR/USD the pair briefly violated the 1.42 handle but hearing good sovereign names looking to purchase Euro on dips towards the 1.4150 approach. JPY price action is again inversely mirroring the overall equity price movements. The JPY is ending the European session on a firmer tone as stocks drift lower following below consensus US housing data and a drop in DOE crude inventory. EUR/JPY at 162.45, GBP at 233.70, USD/JPY at 114.09. Commodity related currencies retaining their overall firm tone as energy markets move higher following the weekly inventory report. USD/CAD at 0.97, AUD/USD at 0.9000. JPY flows also impacting these high yielders. European equities moving into negative territory following the US existing home data and energy inventories. FTSE off 0.2% at 6500, DAX off 0.2% at 7830, CAC lower by 0.1% at 5700. European Fixed income futures firmer. Dec Bunds are at 114.21 (up 50 ticks); Dec Gilts firmer by 40 ticks at 108.02.
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