Trade the News Market Internals Update at 15:30ET

DJIA -335 S&P500 -47 Nasdaq -93

***Economic Data***

– (BR) Brazil July FGV Inflation IGP-DI: -0.1% v 0.0%e
– (CL) Chile July CPI M/M: 0.1% v 0.2%e; Y/Y: 2.9% v 2.9%e; CPI Ex Perishables & Fuel M/M: 0.2% v 0.2%e
– (CL) Chile July Trade Balance: $1.2B v $1.3Be
– (CL) Chile July Copper Exports: $4.2B v $3.5B prior

– Markets worldwide are in liquidation mode today as traders react to S&P’s downgrade of the sovereign rating of the United States. There has been a very large increase in trading volumes in US markets this morning as VIX volatility index spikes above 40 for the first time since last May, well above Friday’s highs. The DJIA and S&P500 are off more than 3%, while the Nasdaq is down 4%. Note that trading on the S&P500 has encountered some resistance ahead of 1,150, with a tiny bounce in evidence mid morning. With the ECB in buying Spanish and Italian debt earlier in the European session, yields on the peripheral laggards are still off their recent highs. USTs are still bid despite the big downgrade, with the yield on the US 10-year note around 2.36%. Gold is off the record $1,715 seen earlier in the European session. All-in-all, things are not looking bright as talk of fresh recession in the US heats up

– In earnings, Tyson crushed earnings expectations in its Q3 and reiterated its full-year revenue expectations. The firm warned that its chicken segment would likely experience a loss for Q4, due to feed issues. Profits at Scotts Miracle Grow were a bit disappointing in the firm’s Q3, although it did raise its quarterly dividend along with earnings. SMG also cut its FY11 outlook. Dollar Thrifty Group missed estimates narrowly. Shares of Bank of America are down 8% this morning after falling sharply late last week as well. There were reports that AIG was planning to sue Bank of America for more than $10B in damages related to mortgage-backed securities.

– Throughout the New York morning there was continued dealer chatter that the ECB was aggressively buying periphery bonds but FX traders seemed unimpressed. EUR/USD dipped towards 1.4150 and was off 150 pips from its opening levels in Asia as European policy makers struggled to deal with a suitable response to the debt crisis. The yields on both Spanish and Italian 10-year Gov’t bonds remained lower due to the ECB action and off by some 90 pips from levels seen last Friday.

***Looking Ahead***

– 11:00 (US) Fed to purchase $0.25-0.50B in TIPS
– 11:30 (US) Treasury to sell $29B in 3-Month and $27B in 6-Month Bills
– 13:00 (BR) Brazil Jun CNI Capacity Utilization: 82.2%e v 82.4% prior
– 17:00 (CO) Colombia Jun Exports: No est v $4.7B prior
– 22:00 (CH) China July Consumer Price Index Y/Y: 6.4%e v 6.4% prior
– 22:00 (CH) China July Producer Price Index Y/Y: 7.4%e v 7.1% prior
– 22:00 (CH) China July Industrial Production Y/Y: 14.7%e v 15.1% prior; Industrial Production YTD: 14.35e v 14.3% prior
– 22:00 (CH) China July Retail Sales Y/Y: 17.7%e v 17.7% prior; Retail Sales YTD: 17.0%e v 16.8% prior

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