- It's been a wild ride this morning: the Dow opened below 11,000 and fell further in early trading, while the Nasdaq opened below 2200 and also fell, but stocks have recouped a decent portion of their early losses. It appears as the sharp move lower in oil prices has helped buoy stocks. OPEC cut its demand forecasts early this morning while Bernanke emphasized significant risks to growth and consumer spending helping leading to August crude to give back $7/bbl at one point. Nevertheless, financials continue to weigh heavily on markets, as investors seem to have lost confidence in the Fed's attempt to bail out FRE-25% and FNM-21%. The sharks are still circling around many of regional banks, while Wachovia traded off more than 10% after a pre-market downgrade although it is back in positive territory. Washington Mutual is rebounding more than 20%, while shares of LEH+3% are being supported by an article in the New York Post overnight that said CEO Fuld has been seriously considering taking LEH private. GM+3% had fallen as much as 5.5% on news that it would suspend its dividend, a move that is part of a larger restructuring package designed to boost liquidity by $15B, including job cuts, assets sales and capital raising. Two big solar names are responding oppositely to new deals: ESLR+8% after announcing a $1.2B, five-year deal in Germany, while CSIQ-9.8% after a 9MW deal that has disappointed investors. CSIQ also announced a mixed securities shelf. In earnings, JNJ+2% is up a bit after beating the street and guiding slightly higher for the year. ETN-11% after guiding below expectations for the FY and the coming quarter; the CEO stated on the conference call that he sees earnings growth in 2009. USB-3.7% is down after missing on EPS thanks to ballooning credit loss provisions.

- Treasuries are yet again the beneficiary of weaker equity markets. A flight to safety continues to bid up the short end of the curve sending the two-year yield below 2.35%. The long bond is seeing a much more mild gains as its yield holds near 4.45% as traders may be focusing on Bernanke's comment that risks to inflation have intensified. The Oct fed fund future is close to fully pricing out any rate hikes at either of the next two meetings while the odds of any hike this year dissipate.

- In a session marked by extreme emotion and volatility, the USD remains broadly weaker against the major pairs as slowing economic outlook and higher inflation concerns sent commodities and currencies on a bumpy ride. The dollar is off its worst levels seen during the New York morning as dealers caught their breath as to exactly what to focus on. The EUR/USD back below the 1.60 level after hitting fresh all-time highs during Europe. The possibility of a USD rout was on high alert after the Saudi Shura Council report advised the King to combat inflation by considering a 20% revaluation of Saudi currency . Continued concerns remain obsessed on the financial sector. Dealers are noticing that general sentiment weighing equities markets and impacting the USD originates from speculation regarding "which institution is too small to bail out?" thanks to Treasury Secretary Paulson noted late last week that some financial institutions should be allowed to fail. President Bush did his bit this morning, asserting that the US banking system remains "basically sound" and consumers' deposit are safe.

- The dollar slipped further after Fed Chairman Bernanke said that he sees significant downside risks to the US growth outlook, also in terms of consumer spending. However, NYMEX front month crude futures retreated to session highs on the potential of demand destruction of slowing global growth. Dealers noted that probability of a Fed rate hike at the next two FOMC meeting has diminished to 12%, which a few weeks back had fully priced in a 25bps hike, plus some.

- The USD losses being trimmed as other regions of the globe exhibited the bipolar effects of the growth/inflation debate. The German ZEW survey was at lows and the Italian Central Bank lowered its GDP view for both 2008 and 2009, while raising its inflation view. The GBP tested the 2.0160 area after higher CPI and RPI data in pre-NY trading, but remains above the 2.0050 as the European close approaches. Risk aversion help to send the CHF and JPY broadly higher against the major pairs. USD/JPY approached the 104 level while USD/CHF approached parity. Carry-related currency pairs were broadly lower as EUR/CHF fell 125 pips to the 1.6030 area.

- Additionally, the Bank of Canada left its key interest rate unchanged at 3.00%, as expected; the USD/CAD tested below the parity level ahead of the central bank decision, due to firmer gold and oil prices.