U.S. Market Update

- Dow -141 S&P -14.7 NASDAQ -25.2

Equity and Bond markets continue to focus on the plunging U.S Dollar and its relationship to commodity prices around the world. Indices are swooning to new lows late in the morning session as comments from Barnanke's testimony on the hill cross. Overall his remarks leave the door open to continued aggressive rate cuts going forward which has maintained pressure on the Greenback. Following a larger than expected increase in weekly unemployment claims and preliminary Q4 annualized GDP of 0.6%, the Fed Chairman noted he does not believe credit disruptions are near an end that there will probably be some bank failures. Treasury prices are climbing with 10-year yield falling back towards 3.7%. The April fed fund future contract has seen the odds of a 75 basis point cut push back towards 40% and the July contact is fully pricing in a 2% fed funds rate. Shares of Apple are helping the NASADQ hold up better than the other indices after the COO reaffirmed growth projections for the iPhone. The energy complex is also outperforming as natural gas futures surge some 4% after weekly inventory data. OIH +1.8% MFGlobal is sliding 20% after the company disclosed they would be taking a large hit from the wheat trading operations.

The USD remains soft ahead on month end trading as oil and gold maintain upward momentum. Dealers are noting that the appetite for commodities is being seen by pension funds. Calpers, which has $240 billion in assets, agreed at its Feb. 19 board meeting to hold between 0.5 percent and 3 percent of its assets in commodities. NYMEX crude moving back towards the 102 level during the session while gold remains above $965 per oz. EUR/USD hit fresh all-time highs above the 1.5190, while USD/CHF broke below the 1.0530 handle. Verbal rhetoric continues to ebb out from various European officials. Swiss Nestle CFO stated that the strong CHF posed challenges, but added that it will not prevent co. from achieving its financial targets. Commodity currencies holding steady. USD/CAD at 0.9730, while AUD/USD at 0.9470. Carry-related pairs focused on continued credit market concerns. US mortgage company Thornburg noted that it saw sudden adverse change in mortgage market conditions, especially on Alt-collateral since Mid-Feb. London hedge fund, Peloton Partners, has liquidated its ABS fund. EUR/CHF is drifting lower towards the 1.60 level. Fed's Bernanke noted that credit disruptions are 'not near' an end.

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