Dollar Lower, Oil Higher As Fear Ruling Street

The confluence of major market moves today is stunning as fear once more rules Wall Street. The U.S. dollar is at a record low, oil edges towards $100 per barrel, the 10-year Treasury fell below 4%, a level it hasn't seen in years, and stocks are heading sharply lower after a big sell off overseas.

Today's debate is focused squarely on what the Fed will do when it meets Dec. 11and whether the U.S. economy is heading toward a recession, as oil heats up and the dollar continues to slide.

"There's some confusion over the Fed at this point and whether the Feds' going to cut again and whether that's going to do anything," said Scott Martin of Astor Management. Martin, on "Squawk Box" pointed out that the stock market has moved lower since the Fed's last rate cut Oct. 31. If the Fed cut again, "You have to wonder if this is something that's going to work, if this medicine is going to work."

"The concern is what can the Fed do to help....," said Martin. "We have to see what this uncertainty begets, and i think we've seen selling so far and we've seen that so far this week."

Boiling Oil
NYMEX crude hit a record $99.29 per barrel in overnight trading. It has since backed down but is still edging higher. M.F. Global's Mike Fitzpatrick says, "There's no skull and cross bones on our charts at $100." His firm expects oil to keep moving higher once it breaks $100, which could be this week.

Subprime Slime
The subprime tsunami continues to have the markets in a stranglehold and has led to a fierce flight to safety in the Treasury markets. Two comments to consider: U.S. Secretary Henry Paulson told the Wall Street Journal that the number of potential U.S. home loan defaults will be significantly bigger in 2008 than 2007.

And former Fed Chairman Alan Greenspan said in Toronto yesterday, that falling home prices and high housing inventories are a major risk to the economy and financial markets.

Bright Spot?
The Financial Times reports that BlackRock has agreed to be the fund manager of the SIV superfund rescue plan set up by three major banks. The fund, backed by the Treasury, plans to buy assets from structured investment vehicles to prevent a fire sale of those assets.

Earnings Central Deere and Co reported a 52% rise in fourth quarter profits, topping Wall Street estimates. Deere net rose to $422.1 million, helped by farm machinery demand in places like South America. The company also cited record farm income in North America driving sales.

Questions? Comments?