Earnings continued to dominate and remain mixed overall. Despite a stellar 18% bottom-line beat in earnings thus far this reporting season, the sales numbers have actually disappointed and are tracking -0.2% below conservative estimates. This suggests a similar situation to what we saw in 2Q when earnings expansion was driven by cost cutting (especially on the employment front) and not organic growth.

Equities gave up gains towards the end of the NY session after reports came out that the government will begin to cut compensation at many of the so-called TARP institutions while a prominent financials analyst downgraded one of the big US banks to a sell. US stocks ended the day down nearly -1% on the back of this.

The US dollar recovered smartly into the latter part of the session as the robust negative correlation (-95%) between risky assets and the buck remained intact. EUR/USD cleared the 1.5000 option barrier earlier in the session and approached the 1.5050 zone (where yet another option barrier apparently lurks). The reversal in stocks saw the pair back down towards the 1.4990/95 area (the prior 2009 highs) where buyers emerged.

The commodity complex was decidedly bid as weekly energy inventories came in on the light side of expectations. Crude oil stockpiles rose 1.3 million (consensus looking for 1.5) while gasoline plunged -2.2 million (market expected a -0.7 decline). Brent crude traded from around $77 ahead of the data release to a session high above the $80 mark. Should oil prices remain sticky up here, gasoline pump prices should trend back to the $3/gallon area. This would be a near -$50 billion (annualized) hit to consumer pocketbooks just in time for the holidays. Not trivial in terms of the retail outlook.

The so-called commodity currencies relished the bid tone to energy prices. USD/CAD plunged from a 1.0560/70 open towards a low near the 1.0380 area. AUD/USD meanwhile, ratcheted up to a 0.9325/30 high after an open near the lowly 0.9210 zone. Both pairs have reversed slightly on the equity selloff but the trend remains in favor of stronger CAD and AUD for the foreseeable future.