U.S. Market Update

- Dow -51 S&P -6.5 NASDAQ -16.8

Indices resume a downward trajectory as credit market fears continue to weigh. Major publications continue to point to signs of further deterioration in the functioning a variety of fixed income markets. The WSJ noted that two indices that track the cost of buying insurance on bonds issued by 125 large companies have doubled since the beginning of the year, a sign that the financial squeeze that began in investments linked to subprime mortgages has spread. A separate article noted that the CMBX Index, which tracks the value of bonds backed by commercial mortgages, suggest rough waters ahead for that industry as well. Sandford Bernstein cut Q1 numbers in several of the brokers ahead of the open keeping the pressure on financials. XLF -1% FNM -4.5% and FRE -7.5% are under pressure after being cut to sell at Merrill Lynch. Gasoline futures are the weakest among energy trading off 1.5% while natural gas is higher by 5 cents at $8.94. DNA opened higher but has come back towards unchanged ahead of an expect ruling regarding Avastin due out later this afternoon. One area of relative strength is consumer staples. CLX is higher by 2.25% after reaffirming 2008 guidance while shares of CL KMB UL and PG are all seeing gains. Treasury futures have been firmer with the weakness in equity markets. The 10-year is higher by a quarter of a point yielding 3.73%. The Greenback is modestly lower again with no U.S. data to trade off of. USD/JPY remains close lows at 106.86. Cable briefly tested a purported options barrier at the 1.97 level but has since backed off some 50 pips. The Loonie came under a bit of pressure following weaker than expected January retail sales figures.

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