U.S. Market Update

Dow +120 S&P +10.4 NASDAQ +23.4

Equity markets are following through to the upside as the momentum continues from yesterday's 3%+ rally for the major indices. Futures are making new highs late in the New York morning. Financial stocks have found some real traction at least temporarily from yesterday's Fed announcement, and look to post solid gains again led by the investment bank/broker dealers. BSC is up 6% after the CEO appeared on CNBC before the open reassuring investors that there is no truth to the rumors that have been circulating the past few sessions. GS +3% LEH +3% XLF +2.5% Humana -12% slashed guidance keeping the pressure on the stock. The energy complex is the notable laggard as sellers have stepped after weekly crude inventories rose by more than 6M barrels. April crude is lower by 1% but the bullish sentiment is tough to break as it still trades near all-time highs. Gasoline and Heating oil are off 1% as well. Treasury prices are marginally higher but the action there is fairly subdued. Prices did firm ahead of the open of floor trade on renewed rumors around the globe of multiple hedgefunds being in trouble. Metals futures are hovering close to the unchanged market as most of the action appears to be in the equity markets.

Fixed-income markets continued to focus on the stress generated from global liquidity concerns. Dealers noted that the hedge fund community remained under considerable strain as banks continue to demand higher levels of collateral, while customer redemption requests continue to stream in despite recent central bank operations to improve liquidity conditions. The WSJ confirmed earlier market rumors that NY based Drake Capital, a $10B fund, received withdrawal notices from half of its investors. Also problems at Dutch fund GO Capital resurfaced as rumors circulated that the Co. has halted redemptions. Thus, the euphoria the USD managed to generate from the central bank led liquidity operation on Tuesday seemed to be slowly evaporating. The USD is also weighed down by continued elevated commodity prices. Front month NYMEX crude continues to probe the 109 area throughout the US morning, while spot gold remains in striking distance of breaking the $1,000 level. Global inflationary fears are hampering any follow through USD buying. UAE Economic Min noted that changing USD peg may ease the country's inflation and stresses that the USD's fate remains in foreign hands. The EUR/USD briefly tested the 1.5500 level before option-related selling stalled the Euros upside momentum. Dealers note that Mid-East demand for Euros has been 'aggressive' over the last 48 hours. The June GILT contract aggressively sold off after the DMO announced its planned FY 2008-09 Gilts sales at £80B v £59Be. Gilts are off 57 ticks at 110.68, June Bunds are firmer by 5 ticks at 117.51 European Equities are in the middle of their session trading range. Euro Stoxx 50 +1.35 at 3,654, FTSE 100 +1.45 at 5,772, CAC 40 +1.5% at 4,700 and DAX +1.3% at 6,609

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