A Big Day of Corrections for All Markets

Profit taking and short term positions have been very vulnerable at these levels and these moves really come as no surprise.

Woven in between speeches from different Fed governors, including one from Evans, one from Hoenig, and one from Bernanke before yesterday’s open, were multiple news releases. First this morning came CPI Jobless Claims, New York State Manufacturing Index, and Real Earnings. CPI was on par with expectations, rising 0.3 percent for the second month in a row. Jobless claims roe by 20,000, the highest level reported in the past four weeks. The increase was most likely due to the outbreak of wildfires in California, and the writer’s strike which continues to shut down production. Core inflation also rose moderately by 0.2 percent, the fifth straight month at this rate.

The New York State Manufacturing Index reported that “conditions for New York manufacturers improved in November, at a pace close to that observed in October.” The overall index was revised from the previous 28.75 and reported at 27.37. Expectations of 18.00 were far from met. New orders, unfilled orders, and inventories all declined, while shipments improved. Real average weekly earnings, adjusted for inflation, meanwhile, fell 0.2 percent and hourly earnings, not adjusted for inflation, rose 0.2 percent.

The Philadelphia Federal Reserve Bank released a survey this morning, showing some indication of growth in the eastern U.S. The Philly Fed reported business activity index to be 8.3 in November, as opposed to the previous 6.8 from October. The employment index fell to 4.8, the lowest in four months. New orders increased slightly, and prices paid were slightly reduced. This report led firms to lose faith in future employment and believe the economy will be less prone to be open to new business developments.

The Japanese Yen and the U.S. Dollar recouped some losses during today’s cycle. As mentioned in previous articles, I like the Yen and so far so good. It will be in for a wild ride, but I believe a wild ride higher. Reports released today from Canada dragged the “Loonie” down with weak manufacturing data. Commodity-based currencies like the Aussie and the Canadian suffered with metals and the oil.

The UK’s economy is also wavering, bringing the Pound down with it. In fact, the Pound dropped to a three week low against the Dollar in today’s session. It also reached the weakest level against the Euro since 2003. The Governor of the Bank of England issued a warning yesterday telling investors to watch for rising inflation, a weakening housing market, slower growth, and a falling Pound. The Governor also cautioned investors that this downward trend will likely continue at least to 2009. After Japan's Trade Ministry reported a weaker than expected tertiary index of services, the Yen increased and eventually ended up on the day. Currencies in Norway, Australia and Brazil also declined.

Early in trading today, the U.S. Dollar was able to mend slightly more losses and end up on the day with positive reports from CPI. However, the U.S. currency does have some problems to face overseas. Sultan Bin Nasser al-Suwaidi, the UAE central bank governor of the United Arab Emirates, said it may end the Dirham's 30-year-old peg to the Dollar and link it instead to a basket of currencies.

This report may include information garnered from the following sources: CBOT, Bloomberg, Reuters, Interactive Investor, Cattle Network, Earth Times, AgReport, Aol Money, CNN Money, Market Watch, The Forex Market, Yahoo Finance, FXsol, Financial Times, iWon, Report on Business, Crain’s, Dow Jones Newswire, Nasdaq News, INO News, The Hightower Report.

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