It was a reversal of fortunes for stocks in NY as overnight risk aversion continued to permeate the marketplace. US equities fell to new cycle lows with the S&P plunging -4.3% to 682 – a number not seen since 1996. The Dow was -280 points lower at 6594 as well. US Treasuries continued their rally and closed markedly higher with the 10-year yield dipping more than -16 basis points to 2.82%. Gold was the star of the session as the precious metal jumped more than $26 on the day and was sitting by 933 after hitting a 900 low yesterday.
Economic data out of the US continued to look dismal. The factory orders report showed a downward revision to nondefense capital goods ex aircraft to -19% YoY in January from -15% in December and -5% in November. This metric is a proxy for capital expenditures by firms that feeds directly into GDP and suggests 1Q growth in the US will be even weaker than the dismal result last quarter.
If that wasn't enough, mortgage delinquency data showed nearly 8% of all US mortgages are currently in some form of default. This is well above the 6.1% rate we witnessed in the midst of arguably the worst post war recession in the early 1980s. If recent indicators such as the increases in jobless claims are prescient, it looks as if this is only likely to get worse in the first half of 2009. As such, the bottom in US housing still remains elusive.
The price action in FX was very reflective of the unwind in stocks. Most of the talking was done through the yen crosses. USD/JPY plunged more than -130 pips to just below the key 98 mark. EUR/JPY meanwhile shed a more aggressive -170 points to 123 ahead of the NY close. Most of this is likely in anticipation of a weaker NFP number tomorrow morning. Consensus is looking for a -650K print, but the risk is clearly to the downside here. EUR/USD was pretty uneventful following Trichet's press conference and the pair ended the session about -10 pips lower by the 1.2550/60 area.
Upcoming Economic Data Releases (Asia Session) prev est
- Nothing noteworthy at this point
