- Depressed markets seemed to be gaining further traction this morning as the Nasdaq built on yesterday's gains, heading straight up from the open, while the Dow gained after some initially choppiness. But indices have stumbled in mid-morning trading, coming off their best levels, with the Dow in the red mid day. Oil is continuing its decline, trading down towards the $125/bbl mark after weekly inventory data revealed a surprisingly large build in gasoline stockpiles. Traders noted the unexpected build at a time when stockpile typically decline from the summer driving season; the reversal could be the result of demand destruction working its way through the system. Gold is approaching its 30-day moving average of $923.44, off another 2%. After falling in the pre-market, Washington Mutual rebounded sharply in early trading as the name shot up 13% from opening levels; investors seemed to ignore the bank's $3.3B loss (the largest in its history) and comments from the CFO noting that prime mortgage delinquencies are still rising and that he expects credit losses will stay high until home prices stabilize (which he believes won't happen until 2010). WM was back around even by mid morning. Other troubled regional banks WB, RF, STI and KEY rode the wave up and then down with WM. Just a week after seeming to hit bottom, the GSEs are getting another shot in the arm after a White House spokesperson said President Bush would not veto Congress's housing rescue bill, saying this is "no time for a prolonged veto battle." FRE and FNM were up more than 15% and 20%, respectively, before falling in mid morning trading. The major investment banks are up slightly, while the XLF is testing its 50-day moving average. The housing bill news is also helping mortgage and homebuilding related stocks, with RDN+34% and PMI+15% making big gains, followed by TOL+4%, MTG+3% and PHM+1.5%. The XHB is up more than 5%. In tech EMC+9% is having a big morning after soundly beating Wall Street, although the firm guided more or less in line as the CEO says he sees a tough economic environment for "at least" the next several quarters, noting that customers are spending less on tech. YHOO+3% is up after a mixed earnings report yesterday, in which the internet firm missed estimates but guided higher for the coming quarter. VMW-6.5% is having a rough morning, after coming in more or less even with estimates and guiding lower after the close; echoing EMC's chief, VMW's CFO noted that the firm is seeing longer sales cycles and delayed purchases by some customers. Elsewhere in tech, the New York Times reported that Apple CEO Steve Jobs has told associates "he is cancer free and doing well," which has helped provide an underlying bid to the name. Multiple Dow components reported positive earnings for the quarter: T+5.6% was mostly in-line with estimates, BA-2.3% missed, MCD-1.6% came in ahead of the Street, while PFE+3.6% also beat the experts; yesterday's news that an AMA study found Viagra also helps in female sexual dysfunction is certainly helping PFE get it up this morning.

- US Treasury yields continue to push higher making fresh one-month highs in both the two- and ten-year early in the session. The curve continues to flatten slightly after the two-year yield tested 2.80% briefly. Fed fund futures still see a rate hike at the next meeting as unlikely, but Oct contract has seen the odds of a 25 bp hike two meetings up drift back above 50%.

- The dollar is maintaining a positive tone during the New York morning as technical factors help firm up the tone. Softer commodities haven't hurt, although oil is off session lows after "verbal intervention" from Nigeria's favorite militant group MEND, which threatened to destroy major oil pipelines the delta region in the next month. Lower gold is also helping. The EUR/USD cross dipped below the 1.57 level, while the USD/JPY pair continued to maintain a hold above its 200-day moving average of 106.99, aided by M&A flow: Tokyo Marine announced its intention to acquire Philadelphia Consolidated for $4.6B during the European morning.

- Across the pond, the GBP is maintaining a firm tone against the majors after the BoE minutes surprised the market with unlooked-for hawkish concerns about inflation. In his recent letter to the Exchequer, BoE's King had noted that the rate path was uncertain. The BoE minutes noted that any interest rate move would get more attention at the August policy meeting. The GBP/USD is off its overnight highs of 2.0025 but remains steady against the major currency pairs, with the EUR/GBP at 0.7860, the GBP/JPY firmer by almost 200 pips at 215.15 and the GBP/USD at 1.9965. Meanwhile, the EUR/JPY is making fresh all-time times of 169.97, but has been unable to knock out the alleged option barrier at the 170 level, ending the New York morning at 169.20.

- Dealers were noting that the changing technical picture could possibly set up a new phase to the overall USD sentiment, particularly if crude stays below the $132 level. Dealers noting the price action in several emerging market currencies that could propel a new USD trend. Dealers added that perhaps the central banks would take note of a situation that would favor a 'successful intervention.'

- Commodity currencies were mixed during the NY morning. Falling commodities help to keep AUD/USD under pressure. CAD firmer as its headline CPI data exceeded expectations.