Thursday, November 06, 2008

Markets Refocus On Slowing Growth

The market is under pressure again this morning over concerns about how much economic growth is slowing. Asian markets were hit by heavy profit taking, with most bourses down more than 5%.

Acknowledging the slowing growth, the Bank of England slashed its benchmark lending rate 150 basis points from 4.5% to 3.0%, a huge move and one that speaks to the fact the concerns about future growth should be trumping inflationary concerns at the moment. The ECB also cut rates, from 3.75% to 3.25%, and will likely have more cuts in the future.

The rate cuts in Europe are pressuring the Euro vs. the dollar, which is also weighing on commodity prices. Oil prices are down sharply. After briefly popping back above the $70 level earlier this week, crude oil prices are down more than $3 today back near $61.50.

Retailers reported October sales today, which were mostly weak (more on that later). But although the reports were weak, some of the stocks (JWN, TGT, etc) are actually bouncing. And Wal-Mart bucked the trend, poasting same-store sales growth of +2.4% last month. Seems that consumers are bargain hunting.

Tech stocks are lower today after Cisco (CSCO) lowered its guidance, saying that worldwide growth was slowing dramatically and forecasting future order growth right now is very difficult. The CEO also said that he expects the US to be the first to rebound from the economic slump, followed by the likes of India and China.

The put/call ratio is spiking to 1.45 right now, and the volatility index (VIX) is up 9% today to 59.75.

long VIX puts


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