Trade the News Market Internals Update at 12:00ET

Dow -445  S&P -50  NASDAQ -115

***Economic Data***

– (BR) Brazil Aug FGV Inflation IGP-10 M/M: 0.2% v 0.2%e
– (PD) Poland July Sold Industrial Output M/M: -6.0% v -4.3%e; Y/Y: 1.8% v 3.5%e
– (PD) Poland July Producer Prices M/M: 0.4% v 0.2%e; Y/Y: 5.9% v 5.7%e
– 8:35 (US) Fed’s Dudley to speak in Newark, NJ
– (US) July Consumer Price Index M/M: 0.5% v 0.2%e; CPI Ex Food & Energy M/M: 0.2% v 0.2%e; CPI NSA: 225.922 v 225.8e
– (US) Initial Jobless Claims: 408K v 400Ke; Continuing Claims: 3.702M v 3.70Me
– (CA) Canada July Leading Indicators M/M: 0.2% v 0.2%e
– (CA) Canada Jun Wholesale Sales M/M: +0.2% v -0.5%e
– (CL) Chile Q2 Current Account: $13.2M v $490Me
– (CL) Chile Q2 Gross Domestic Product Y/Y: 6.8% v 6.5%e
– (US) July Leading Indicators: 0.5% v 0.2%e
– (US) Philadelphia Fed: -30.7 v +2.0e
– (US) July Existing Home Sales: 4.67M v 4.90Me
– (US) EIA Weekly Natural Gas Inventories: 50bcf vs. +47 to +50 bcf expected range

– Risk aversion is clearly back in charge this morning as investors stampede for the exits in stocks. In a sign of just how rocky the markets have become the yield on the 10-year US Treasury note briefly dipped below 2.0% to 1.978% and the VIX index popped right back above 40. No single event is the catalyst in the big slide and analysts are citing multiple factors for the panic: tepid measures discussed by French President Sarkozy and German Chancellor Merkel (Merkozy), the Fed checking US branches of European banks for their stability, recent comments from Fed hawks Fisher and Plosser downplaying the likelihood of QE3, demands from various European nations that Greece offer cash collateral for bailout loans, S&P trimming US GDP estimates for the second half of 2011 yesterday, and others. After the open, the August Philadelphia Fed Index shocked markets with a -30.7 reading, including a very negative reading in the new orders component. Analysts caution that the Philly Fed index has been out of step with other regional Fed surveys and that more data would be needed before any dire conclusions could be drawn from the Philly data. Spot gold hit fresh all-time highs around $1,826/oz earlier this morning. Meanwhile front-month crude has given up all its gains from the last fives session, dropping below $83.

– Limited Brands reported a higher-than-expected Q2 profit as it sold more products at full price and the company raised its August comp and FY11 profit forecasts. Quarterly losses at Sears Holdings more than tripled in its Q2, missing estimates by very wide margins as the retailer failed to stop its prolonged sales decline. In a sign of the deepening malaise at Sears, the company announced more layoffs with earnings. Consumer products name J.M. Smucker just met expectations and also cut its revenue growth forecast for FY12. Technology products distributor Tech Data beat expectations on solid profit and revenue growth in the quarter.

– EUR/USD fell around 130 pips from the Asian open but managed to hold the 1.43 level. EUR/CHF reversed earlier moves as safe-haven flows benefited the Swiss Franc. The weaker Philly Fed data and its components only added to the global; growth concerns. European peripheral spreads widened as safe-haven flows sent the German yields sharply lower. The 10-year Bund yield moved below 2.09% for all-time lows.

***Looking Ahead***

– 11:00 (GE) German Chancellor Merkel attends State Election Campaign Events in Mecklenburg
– 13:00 (US) Treasury to sell $12.0B in 5-Year TIPS Reopening
– 13:30 (BR) Brazil July Tax Collections (BRL): 83.6Be v 82.7B prior
– 14:30 (US) Fed’s Dudley to tour Jersey City, New Jersey
– 18:00 (CL) Chile Central Bank Interest Rate Decision: Expected to leave the Nominal Overnight Rate Target unchanged at 5.25%

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