U.S. Market Update

Dow -142 S&P -15.2 NASDAQ -25.24

U.S. Indices maintain a downward trajectory with financials and tech still leading the way. Rumors of write downs both here and abroad continue to circulate while the Dubai International CEO said he expects another capital injection for Citigroup in order to survive. Merrill Lynch cut numbers in several financials highlighted by Citigroup which trades at a 10 year low. Tech was sideswiped by Intel when the Co. lowered their Q1 gross margin guidance by 200 basis points citing lower NAND flash memory prices. INTC -2% SMH -1% SNDK -2.3% Retailers are under pressure after BKS -8% cut guidance and BBY -2% was downgraded before the open. JTX is giving back more than 25% after a disappointing Q3 earnings report heading into the heart of tax season. As equities made their latest leg down late in the NY morning commodity futures saw profit takers step in with some force. April gold is down close to 2% at $964 after trading as high as $990 earlier. Copper and gold are each down roughly 2%. Energy markets are seeing sellers as well led by April crude off more than 2.5% dipping back below $100. Gasoline futures have given back more than 4% today. Treasury futures are bouncing around the unchanged level ahead of tomorrow's ADP jobs report. The 10-year is fractionally higher yielding 3.53%.

In a session marked with little economic data, currencies focused on the rumor mill in terms of finding both momentum and direction. Rumors circulated just ahead of the NY open that two SIV funds were in 'technical default' coupled with a fresh "rogue trader" rumor concerning a major US based brokerage house. European equities eroded into negative territory as the session wore on, aided by a research note from Merrill Lynch which lowered various FY08 EPS estimates for the aforementioned US bank. Thus risk aversion continues to help firm CHF and JPY against their numerous currency pairs. Fed's Kohn noted that State banks faced deteriorating credit conditions, indicating more asset write downs were likely. USD/JPY is hovering just below the 103 area with chatter of an option barrier lurking down at 102.50. USD/CHF trades at 1.0340 and EUR/CHF at 1.5745 area.

The Bank of Canada did provide a spark when it lowered their interest rates by 50 basis points to 3.50%. The BOC cited a clear concern over the possibility that the US economic slowdown could be longer and deeper than previously thought. The BOC noted that further rate cuts were likely due to US econ situation and noted that the US economic slowdown will have a large spillover effect on the global economy. USD/CAD rallied some 60 pips to 0.9940 following NBOC rate decision before consolidating. Verbal intervention continued again this session as the Euro-Zone finance ministers met. EU's Barroso says it is likely that the ECB will examine the strong euro attentively, but sidestepped a bit when he noted that the ECB should remain independent. The Belgium Finance Minister stated that the FX situation is due to weak USD, not a strong Euro; and Belgium was reassured by US stance on the dollar. Portuguese Finance Min joined the choir noting that the current level of Euro is a "matter of concern"; but added the usual mantra that currencies should reflect fundamentals. More importantly he noted that current Euro volatility was "not uncomfortable." European Fixed income was at session highs ahead of the European close. March Bunds +36 ticks at 117.80, March Gilts +33 ticks at 110.94 Euro-Stoxx 50 -2.25% at 3,594; FTSE 100 index -1.6% at 5,724; CAC-40 -1.9% at 4,657 and DAX -2.5% at 6,520

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