Fear... when markets will understand that they must control their endless fears just to let the ship continue sailing; with all the aid supported by various governments in the world in order to mitigate the defect in the financial ship it did not stop the leak that has been threatening its existence.
Banks who were the main reason behind the dilemma are not even considering easing their tension and hesitation just to revive back the economy; a whole country without the support of the banking industry will not survive even as interventions by governments continue to take place. The resumed concerns and hesitation had pushed the Libor rates this week to the upside clearing that banks are not lending money in markets.
Yesterday, Obama the US President signed the biggest US bailout in attempt to restore back confidence in the economy, marking history that a President taking radical actions in the first one hundred days for him in the office. This Crisis is interlaced to the extent that it would take more than one year to revitalize the world's leading economy which dipped in a recession from the sub-prime mortgage issue that altered and reformed into the worst squeeze since the great depression.
Yesterday markets witnessed a fall in the Empire Manufacturing reading reaching to -34.65 levels the lowest since 2001; coming worse than the previous -22.20 and what markets anticipated -23.75. This fall in the manufacturing reading clarifies that the United States is facing a deepened recession and the measures which have been taking place since last year failed to prop up the manufacturing sector. Therefore, it is not an issue of domestic demand but it is now a worldwide dilemma, demand and consumptions from the world's economies were hammered badly which resulted in affecting all the world's economies that depend mainly on their levels of exports.
Along with this pessimism, General Motors & Chrysler faced yesterday their first deadline to reconstruct their falling companies in order to continue having aid from the US governments. Nevertheless, even with the given money they had failed to restructure their companies demanding more money to keep functioning, the US car industry is officially teetering on the brink of a total failure, their deadline is coming and till now no profit projections seen due to the endless fall in demand and the surge in Unemployment rates.
Due to all that, the US indices closed red yesterday, Dow Jones Industrial average fell 3.97% or 297.81 points closing at 7552.60 levels leaving the index with a total loses of 13.94%. S&P fell the most 4.56% or 37.67 points reaching to 78917 levels adding to the early losses seen earlier this year pushing it to 12.63% and finally NASDAQ fell 4.15% or 63.70 points reaching to 1470.66 levels.
Our calendar today contains some fundamentals that would give us more information about the US housing sector that was the main reason behind all this destruction. According to market projections, the housing starts in January plunged 529 thousand from the previous 550 thousand along with the permits that retreated to 525 thousand from the previous 549 thousand.
Yet the range of expectations in markets fall in a wide range, pessimistic analysts expects to see the housing starts plunging down to 480 thousand and the highest expectations falls at 578 thousand. In addition, the building permits range expectations falls between 565 thousand and the previous 480 thousand clearing that demand on the housing sector is still weak as recession in the world leading economy continues to deepen.
However, the major market mover would be the FOMC minutes that would be released later today, the minutes and the import price index will be the main readings that might signal to threats of deflation. Recently we saw twice that the feds stand ready to buy long-term treasuries at anytime, in an attempt to fight any threats of deflation in the United States, where they would be recording the first deflation!
The falling crude prices from the unprecedented levels recorded in the prior year had dragging the import prices down to extreme low levels, where according to market expectations that monthly prices fell -1.2% in January from the previous -4.2% but the yearly prices dipped down to -11.2% from the previous -9.3%.
Based on that the Future US indices managed to incline in the Asian session, future Dow Jones added 75 points reaching to 7582 levels; the future S&P 500 added 8.50 points reaching to 794.90 levels and NASDAQ inclined 12.0 points reaching to 1194.50 levels.
So today, we have a full calendar that would signal to any futuristic changes in the upcoming period, so my dear readers watch closely what would be taking place today...