Markets dealing with several issues this morning.
1) The S&P/Case Shiller Home Price Index August fell 4.4% year over year. This is the biggest decline since the series began 6 years ago. The index is a composite that tracks twenty U.S. cities.
3) Concern the Fed will not cut interest rates, based largely on a Greg Ip article in the Wall Street Journal. Traders almost universally believe the Fed will cut; there is sufficient evidence that the U.S. economy is weaker and sufficient evidence that the credit markets remain jittery to justify a further rate cut.
Still, the mere mention of this is enough to drop the market leaders--commodity and energy stocks. Why? Rate cuts generally help global growth, and they have been helped by the weaker dollar that has been a byproduct of rate cuts.
Separately, the UBS announcement that there may be more losses in the fourth quarter from the U.S. mortgage market mess is again weighing on many financials, particularly brokerage firms like Goldman,Lehman,Morgan Stanley and Bear Stearns. Concern is that others will announce large writedowns as well.