UPDATE:What happened to futures? They went from 1490 to 1483 in the last half hour. The reasons:
1) Target gives very cautious commentary on December, saying sales will be well short of their prior view; down 5 percent pre-open.
2) ECB Pres Trichet talking tough on inflation, saying "the latest information has confirmed the existence of strong upward pressure on inflation." This brought European stocks down, and we followed.
Are bonds about to lose their flight-to-quality premium? The Fed, the executive branch, the legislative branch, and now even the Bank of England (which cut its key rate a quarter point to 5.5 percent) are working to resolve credit problems. The 10-year is looking toppy here.
The Street was a bit surprised yesterday after word leaked out that some agreement had been reached on freezing ARMs for certain homeowners--no one thought it would get done so quickly.
And look at structured investment vehicles (SIVs): major players like Citi are about to establish a fund; many traders now seem to feel that they will either being taken onto the balance sheet, vertically sliced, or just liquidated. Again, many on the Street have been surprised at the speed at which this has moved.
1) Jobless claims a bit stronger than expected, which is good news.
2) Notice that as the dollar has been rallying for the last two weeks, oil has been dropping. Happening again today.
3) Lehman's Roger Freeman lowers estimates fourth quarter and 2008 estimates for Morgan Stanley, Merrill Lynch, and Bear Stearns, but raises Q4 estimates for Goldman (but lowers 2008).