- Resurfacing fears about Lehman Brothers have added to the ongoing concerns about the GSEs, which led to a lower open once again led by the financials. FRE and FNM began the morning down 18-20% as investors continued to flee the GSEs; overnight the WSJ reported that the institutions will have to refinance $225B of debt by the end of September while Ladenberg's Bove reiterated his belief that they need to be dismantled. But the names have spiked into positive territory mid morning as strong-stomached momentum traders looked to profit from an early reversal. LEH fell as much as 8% before retracing somewhat. Overnight Citi cut the firm's price target and widens its estimate to -$3.25 from prior loss per share view of -$0.41, while articles in the WSJ and New York Times discussed rumors and weakness at the Lehman. The FT said LEH held secret talks to sell up to a 50% stake to South Korean or Chinese investors in early August but failed to reach a deal because it was asking too high a price. The major financials are under pressure, helped along by cuts in EPS estimates out of Lehman and Citigroup. New York AG Cuomo said MER-3% has to agree to a settlement with his office today or "we'll be in court tomorrow." More retail earning reports showed mixed results. PLCE+9.5% managed not to loose the -$0.43/shr expected by analysts and reported strong same-store sales for the quarter, while DKS+8% after beating estimates and guiding slightly higher for the year. LTD+9.5% beat the Street and guided higher for the year, noting that it does not expect an improvement in the macroeconomic environment this year. HOTT-19% came in just above estimates but offered dismal EPS guidance for the next two quarters. SMRT-8.3% reported a bigger loss and lower margins than expected, thanks to higher markdowns and lower sales. BONT-7% revenue for the quarter was lower than projected; the company slashed its full-year earnings guidance. Mid-cap Tech firms SNPS-13% and JDSU-14.5% reported mixed earnings and both guided lower, earning themselves cuts at major brokerage firms. In other news, coal stocks BTU, CNX and MEE are showing strength on higher commodities and UBS raising ACI to a buy. The airlines are giving up recent gains as oil moves higher. Front-month crude has risen sharply, hitting highs above $121 as traders react to fresh weakness in the USD, continued verbal arrow slinging between Russia and the West, and growing concerns about the upcoming OPEC meeting on September 9th. Natural gas is climbing above $8.40 despite the increases seen in the morning's inventory reading.

- The USD has reversed its recent uptrend as strengthening commodity prices once again apply pressure to the Greenback. Early in the New York session broad gains could be seen in the JPY as risk aversion seemed to be the major theme carrying through from the overnight session, with FNM and FRE set to open down another 10% respectively. As the morning progressed the focus has shifted away from JPY strength to overall broad USD weakness. Front-month crude has surged above $121, while gold, silver and copper are all trading up between 3 and 6%. The Aug Philly Fed reading showed the biggest drop in prices paid since the months following Hurricane Katrina. All of the above are providing dealers reasons to sell dollars. The EUR/JPY has climbed 135 pips to approach 1.49 and GBP/USD has added 150 pips. It comes as no surprise that commodity currencies are flexing against the dollar: USD/CAD is off 130 pips while the Aussie has ticked to session highs approaching 0.88.