Fannie and Freddie Concerns Overwhelm Any Positives

The day is starting off the same way yesterday finished. Fannie and Freddie are under extreme pressure, and are trading as if the equity value of these franchises will go to zero. There were rumors this morning that a govt. bailout was in the works, but Treasury Sec. Paulson said no bailout was imminent, and that the govt. wants to support them in their "current form".

Oil is also getting another huge spike, hitting $147, after rumors that Israeli warplanes were supposedly conducting tests in an effort to do more sabre-rattling with Iran. The oil ETF (USO) gapped to a new high at the open.

GE reported solid earnings results, helping that stock buck the early weakness. But other than that it is not really helping the broad market. Financials are under heavy selling pressure again, while energy and materials stocks are bouncing.

Asian markets were mostly higher overnight, except for Japan and China. The dollar is weaker again this morning, helping push gold higher. The 10-year yield is higher at 3.85%. And the volatility index (VIX) is spiking +10% higher to the 28 level, indicating rising fear in the marketplace.