U.S. Market Update

Dow -73 S&P -9 NASDAQ -21

U.S. data continues to paint a disturbing picture which is again weighing on the major indices. Before the open the Feb Empire Manufacturing index was released at -11.7, the lowest reading since 2003 and well below the +6.5 estimate. The weak manufacturing data was accompanied by discouraging inflation news. January import prices rose 1.7% led by a 0.8% increase in Chinese imports. After the NY open, the negative sentiment was exacerbated by a Feb preliminary University of Michigan confidence reading of 69.6% which was a 15-year low. Financials are again a sore spot for equity markets as they just can''t shake worries regarding more fallout from the distressed credit markets. Overnight a Citigroup analyst note suggested UBS will have to write down another CHF10B in the first quarter to stay above the 10% capital ratio. The WSJ also reported that Citigroup has barred investors from withdrawing funds from their CSO Partners hedge fund and their Falcon Plus Strategies Fund fell more than 50% in the fourth quarter. Equity markets did find a little relief mid-morning when shares of Bear Stearns surged higher on renewed takeover speculation. Coal stocks are seeing some profit taking after Goldman Sachs downgraded a swath of names before the open. Shares of Best Buy -3.5% added to the losses when they cut guidance before the open. Food stocks are one bright spot today after earnings reports from CPB +6% and HRL+4.8% as well as news that Buffet''s Berkshire Hathaway took a new stake in Kraft +5.5% becoming the largest holder. Treasury prices have been higher throughout the session as they attempt to recover some of yesterday''s losses helped by the weaker U.S. data. The 10-year is higher by nearly a quarter of a point yielding 3.78%. The April fed fund future has seen the odds of a 75 basis point cut climb back to 40%. Metals futures opened higher but have been giving back gains as front month silver and gold are now into negative territory. April platinum is up another 2.3% after making another new all-time high earlier this morning. Energy futures have been elevated throughout the session led by crude which his holding above $96. The upside momentum that built throughout yesterday''s session has carried over today as traders note the approach of a long holiday weekend. Currency action has been pretty benign with the Dollar slightly softer across the board following Dec TIC data that was below estimates. The USD/JPY 107.59 is taking its cue from equities. EUR/USD briefly ticked above the 1.47 level after the weak consumer sentiment reading but is since retreated some 25 pips.

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