Risk aversion returned to fore in a major way as the markets took Treasury Secretary Geithner's lack of details on the Financial Rescue package as a bad sign and decide to shed risk. The passage of the massive +$800 billion fiscal stimulus by the US Senate followed soon after but this had become a foregone conclusion after yesterday's overwhelming procedural vote to end debate on the issue. The Senate and House will now convene in an attempt to hash out a single bill that will be voted on and presented to President Obama if passed. Expectations are for a bill to be on Obama's desk by Friday, but any stall to this timeline could see risk assets head even lower into the weekend.

It was a textbook flight to safety as stocks were pummeled nearly -5% in broad terms while Treasuries were bid. The S&P plunged more than -40 points and was sitting just above critical daily trendline resistance which comes in at 822 currently. The focus remains lower here while below the 850 level. The US 2-year yield slipped more than -11bps to 0.90% while the 10-year collapsed about -17bps to 2.82% as uncertainty gripped the markets. Gold rallied a hard $22 on the day and closed above $917/oz to boot..

In FX it was a classic selloff in risk assets as well. EUR/USD slumped more than -100 points and was sitting near 1.2880 ahead of the close. The 1.2810/00 area looks like the next critical support zone here and we would expect a fresh dose of weakness to emerge below. The yen crosses were punished as well and USD/JPY shed -105 pips to 90.30 while EUR/JPY was down more than -240 pips near the 116.30/40 zone. Cable was pounded more than -300 points to the critical 1.45 mark and the focus remains lower here while below the 200hr SMA at 1.4523 currently. Last but not least, the near -$3 decline in oil prices to a January 20 low helped push USD/CAD up more than 220 pips in the session to the 1.2450/60 area.

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