US Market Update

Dow -243 S&P -26 NASDAQ -42

- With US bond markets closed for the Veteran's Day holiday and no economic data on the schedule, equity traders seem to be hitching their wagons to some dramatic moves in currencies. US indices fell before the open and extended their declines after the bell, as the thin trade accompanying a holiday session is only adding to the volatility. Note that the Vix briefly moved back towards 65. Crude is trading below the $60 level, while other commodities continue to lose ground as well on the back of a firmer Greenback. The CRB Index is of almost 3%.

- Investors are punishing the major consumer- oriented stocks that reported yesterday and this morning, including Starbucks and retailers Liz Claiborne and TJX Companies. SBUX missed earnings and revenue targets, and reported US same-store sales -8% for the quarter. SBUX noted that its outlook for 2009 was very unclear, noting that whatever happened, its fiscal Q1 would be its toughest ever. LIZ-15% held things together in Q3, coming in more or less even with estimates. But on the conference call today, LIZ's CEO warned that the new quarter has begun with “dramatically falling demand.” TJX-5% also met expectations for the quarter past, but cut its outlook for the coming quarter and the full year. Shares of MarineMax are defying gravity this morning, up 15% mid morning: the firm's quarterly performance was as expected, while same-store sales declined a whopping 45%, partly due to the fall hurricanes. Toll Brothers released preliminary revenue figures for their Q4, noting that they are beating estimates by a healthy margin, with pre-tax writedowns at $120-220M for the quarter. Rockwell Automation reported a solid quarter yesterday; this morning the ROK's CEO warned that 2009 would be very challenging, and the company guided well below expectations.

- Las Vegas Sands remains halted as of mid morning after pricing a major secondary offering, amounting to approximately 50% of its outstanding common stock, plus preferred shares and warrants. Sheldon Adelson's shaky gambling empire reported a big earnings and revenue miss yesterday after the close, noting that current conditions in the capital markets and the global economy have force it to “temporarily or indefinitely” suspend portions of its development projects. On its conference call, LVS said that it was in the process of raising about $2B in capital, which is equal to about 70% of the company's market cap.

- The deteriorating economic situation is forcing merger partners back to the negotiating table to re-examine terms concluded in better times. Over the weekend Huntsman and Hexion were wrangling over the pricing behind their longstanding merger drama. Today Technip slashed the terms for their all-stock tie-up with Hughes Telematics to $385M from $700M back on June 16.

- Insurance names are taking it on the chin after Goldman initiated the sector with a cautious outlook overnight. Goldmand added HIG-24%, LNC-13% and PRU-10% to its sell list, and rated MET-5% neutral. In addition, the Wall Street Journal reported today that some insurance companies may seek to acquire thrifts in order to get under the Treasury's TARP. Other financial firms are falling with markets, with Citibank down 4% after announcing it would be aiding the owners of around 500K home mortgage loans, while MS-9% on no fresh news.

- The currency market has been all about the technicals throughout New York morning. EUR/USD broke out of its eight-day consolidation triangle pattern to probe below the 1.26 neighborhood, complemented by the GBP/USD breaking below its support level of 1.5500 to test the 1.5225 area. Emerging markets continue to be the catalyst behind the big equity and commodity price moves. Dealers have been watching the Russian Central Bank's FX reserves intently, given that they have steadily fallen over the last three months. Early in the European session dealers were suggesting that the Russian Central Bank likely had a new ruble support level around the 30.70 to 30.71 area. Russia, which uses reserves to curb swings in the ruble that hurt the competitiveness of exports, found resistance futile after the currency weakened well beyond the previously defended 30.41 mark earlier today. The bank reportedly sold around $7B during the session to defend its FX rate. However, it has apparently conceded defeat, widening its ruble trading band for better FX flexibility, effective today.

- The risk aversion factor returned to the market as the heavy European components contributed to lower carry-related currency pairs. EUR/JPY is off 200+ pips at 122.75 and is EUR/CHF down 100+ pips at 1.4925. The German yield curve steepend, with the two-year Schatz yielding 2.36% and the 10-year Bund at 3.66% making the spread at 130 bps.