Trade the News Market Internals Update at 12:00ET

Dow -29 S&P -2.2 NASDAQ -5.3

***Economic Data***

– (CL) Chile Oct CPI M/M: 0.5% v 0.3%e; Y/Y: 3.7% v 3.5%e; CPI Ex Perishables & Fuel M/M: 0.3% v 0.2%e
– (US) Oct NFIB Small Business Optimism: 90.2 v 90.0e
– (US) ICSC/GS weekly chain store sales w/e Nov 5th: +1.0% w/w; +2.7% y/y
– (BZ) Brazil Sept CNI Capacity Utilization: 81.6% v 82.0%e
– (CA) Canada Oct Housing Starts: 207.6K v 195.0Ke
– (US) Redbook Retail Sales w/e Nov 5th: +3.1% y/y; Nov MTD: +1.4% v Oct
– (US) Nov IBD/TIPP Economic Optimism:40.6 v 41.0e
– (US) Sept JOLTs Job Openings: 3.35M v 3..13M prior
– (UK) Oct NIESR GDP Estimate: 0.5% v 0.5% prior
– (EU) ECB drained €183.0B vs. €183.0B Targeted in 7-Day Term deposit tender

– US equity indices made solid gains this morning in the first half hour of trading, up until the key vote in the Italian parliament just after 10:00ET. Prime Minister Berlusconi’s government managed to pass the routine procedural measure, however the opposition abstained, depriving him of an absolute majority and setting up conditions for a possible vote of confidence. There were rumors that clearinghouses would raise margin requirements for Italian debt, however LCH came out after the vote and said they had not taken any such action as of yet. Nevertheless, the yield on 10-year Italian government debt has blown out to around 6.66% and the spread between Italian and other peripheral government debt is widening again. Spot gold is trading just below the $1,800 handle. US Treasury markets are basically flat with the benchmark 10-year yield not move much off of 2%.

– Several key European banks reported dismal earnings this morning, with France’s SocGen missed profit expectations and cancelling its dividend, while the UK’s Lloyd’s Bank seeing a big 21% decline in profits. Note that SocGen’s Greek bank unit doubled its 9-month loss. Note that European Union finance ministers are meeting today to work out how to shore up banks and avert a credit squeeze as they discuss rules for the bank recapitalization plan. McDonald’s reported a higher-than-expected rise in worldwide October same-restaurant sales, which rose 5.2% in the United States. Sales in Asia/Pacific, Middle East and Africa rose 6.1%. Shares of MCD are in the red. Homebuilder Toll Brothers released a very positive preliminary look at the firm’s Q4. Revenue beat expectations and the firm’s home deliveries, signed contracts and backlog were all up notably over year-ago levels. TOL is up 5%, but well off its highs. Industrial name Rockwell Automation topped profit expectations in its Q4, although its FY12 earnings guidance range was very broad. Mortgage insurer MGIC Investment gained nearly 10% this morning after the financial press re-circulated news out on Friday that Kyle Bass’ Hayman Capital disclosed a 4.9% passive stake. Competitor RDN gained 7% on the news.

– The greenback was broadly weaker earlier during the New York session. USD/JPY pair managed to move below the 78 handle with markets testing BoJ resolve to weaken the yen. The BoJ had not been directly involved in the pair since the Oct 31st massive intervention, but was reportedly be using semi-official names to keep it close to 78.00. EUR/USD moved back above the 1.3830 level after press reports noted that the Greek President said to appoint former ECB Vice Chairman Papdemos to head next government, driving algorithm trading models to scoop up euros as a result. The vote in the Italian parliament took EUR/USD right off its best levels, however.

***Looking Ahead***

– 11:30 (US) Treasury to sell 4-Week Bills
– 13:00 (US) Treasury to sell $32B in 3-Year Notes
– 13:00 (US) Fed member Kocherlakota speaks in Sioux Falls, South Dakota
– 13:30 (US) Fed member Plosser speaks on Monetary Policy in Philadelphia
– 16:30 (US) API Weekly Energy Inventory
– 18:50 (JP) Japan Sept Trade Balance +¥351.7B v -¥694.7B prior; Adj Current Account: ¥963.2B v ¥407.5B prior
– 21:00 (CH) China Oct Consumer Price Index Y/Y: 5.5%e v 6.1% prior
– 21:00 (CH) China Oct Producer Price Index Y/Y: 5.8%e v 6.5% prior