Today's Tidbits

End-of-Day Market Update
From UBS: "The whole story today was the plunge in the January Non-Mfg. ISM to a recessionesque 44.6 reading. Equally worrisome was the drop in the Employment Index to 43.9 from 51.8. As such, the winter of discontent (in the economy and in credit) looks to have some legs yet. S&P also published a report today that warned that downgrades of the bond insurers like MBIA and Ambac Financial group could cause knock-on downgrades among US banks with monoline exposure. Fitch then chimed in late day with a more bearish view about subprime collateral losses and put MBIA back on review for downgrade--just 3 weeks after being taken off the Review list. To say that things are fluid in the monoline space is a grand understatement."
From Bloomberg: "U.S. stocks tumbled the most in 11 months after the first contraction in service industries since2002 reinforced concern the economy is in a recession. Exxon Mobil Corp. and General Electric Co. led declines inNew York trading and all 10 industry groups in the S&P 500 retreated...Citigroup Inc. led 91 of 92 financial shares in theS&P 500 lower after Fitch Ratings said it may downgrade the AAA insurance rating on MBIA Inc., the largest bond guarantor.The S&P 500 lost 44.18, or 3.2 percent, to 1,336.64. The Dow Jones Industrial Average decreased 370.03, or 2.9 percent,to 12,265.13. The Nasdaq Composite Index slipped 73.28, or 3.1 percent, to 2,309.57. Shares also retreated in Asia and Europe.Almost 11 stocks fell for every one that rose on the New York Stock Exchange...Fourth-quarter profits at the 311 companies in the S&P 500 that reported results so far declined 23 percent on average, according to data compiled today by Bloomberg...Shares also declined on signs the U.S. slowdown is spreading to Europe and Asia. Europe's service industries grew at the slowest pace in more than four years and retail sales dropped the most since 1995."
From RBSGC: "...propelled the curve steeper and yields lower, but still kept yields within the most recent extremes."
From UBS: "Flows were decent today in treasuries...We must mention T-Bills which continue to fall to ever lower yields even as the Treasury steps up issuance. The 3mo Bill auction tailed yesterday when it came at 2.23 and they went out today 8bp richer. The demand for Bills is insatiable. Today's Treasury volume was a solid 135% of the 30 day average...MBS from 2 wider to swaps in the AM to a tick tighter at the close."
From Deutsche Bank: "...nikkei currently looking for a down 4.6% open."
Three month T-Bill yield fell 9 bp to 2.16%.
Two year T-Note yield fell 15 bp to 1.91%
Ten year T-Note yield fell 8 bp to 3.56%
Dow fell 370 to 12,265
S&P 500 fell 44 to 1337
Dollar index rose .79 to 76.17
Yen at 106.77 per dollar
Euro at 1.464
Gold fell $15 at $888
Oil fell $1.85 to $88.17
*All prices as of 4:38pm