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Daily Market Commentary

Yesterday's equity puke out in equities came to the benefit of government bond holders, yet again.  While the day started off poorly, treasuries were firmly higher on the day.  The benchmark 10 year closed up a full point, or 11 basis points on the day.  Housing Starts went thud, which we mentioned yesterday, but at 10am, the Philadelphia Fed index - a measure of business outlook - dropped to a 6 year low.  Levels we haven't seen since late 2001 were what really sparked the selling in equities 30 minutes into the trading session.  Bonds didn't look back and were off to the races.


  Corporate bonds, as measured by their yield spread over Canada bonds, took it on the teeth yesterday as well.  That is typical action that usually leads the equity markets.  Interestingly, in the little action we have seen this morning they are not recovering much despite the strong rally in equity futures.  We've mentioned this before, but we won't believe in an equity rally until corporate credit spreads stabilize and narrow.  For more information, see the Fixed Income section of idea!share for commentary on credit spreads.





  GE, the company that is the barometer for the global economy, has posted good profit gains, proving that the rest of the world's economy is in much better shape that the US.  Remember, however, that earnings look backwards.  US Leading Indicators will be out at 10am, expected to be negative, and will be important to watch as most economic discussion lately revolves around "are we in/going into recession or not".






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