U.S. Market Update

• Dow +25 S&P +5.3 NASDAQ +7.5

Indices opened under some pressure after yesterday's key reversal late in the session. Shares of AMZN weighed on the NASDAQ giving back $6 in the pre-market following earnings. Weekly initial jobless claims spiked to 375K entering an area that has been consistent with prior recessions adding to the cautious tone ahead of the open. Equity markets have recouped all of earlier losses, helped by some bargin hunting in the financials. The monoline insurers have reversed from a lower open as traders listen into MBI's quarterly earnings conference call searching for clues as to whether they can avoid downgrades from the major ratings agencies. Mastercard is higher by more than 12.5% after providing Q4 results. Treasury prices have been bid up all session, helped by the lower equity open and higher initial jobless claims. The 10-year note future is down a point and its yield has fallen back to 3.61%, but prices have moved well off best levels as the equity market has recovered into positive territory. Traders continue to adjust the downward trajectory for U.S. rates. The April Fed fund future contract fully prices in a 25bp cut at the March meeting and sees odds of roughly 68% that they do 50bp. Those odds did pop above 90% briefly early in the session. Lower energy prices are also serving as a tailwind in today's session, as March crude has been down 2% for much of the session.

The USD remains on the soft side following the FOMC interest rate decision and related statements on Wednesday. The EUR/USD continued to hold above the 1.4830 technical pivot point through the early part of the NY session, but it is off its best session levels of 1.4914 seen in pre-European trading. However, the Euro failed to achieve fresh all-time highs against the USD and has since drifted back towards the 1.48 level. The 1.5000 option barrier remains safe at this time following the soft German retail sales data for Dec. Any break above the 1.50 area is currently diminishing in likelihood as dealers continue to view that the ECB will hold rates steady for foreseeable future. Some suspect that an ECB rate cut is in the works now that Fed has moved 225 bps since the start of the subprime mortgage crisis and ensuing credit crunch. The USD/CHF did manage to hit fresh all-time lows of 1.0755 before recovering to 1.0825 area. Dealers cited that risk aversion behavior resurfaced in the market after the US equities ended Wednesday's session in negative territory and opened lower on Thursday. Dealers note that the 1.0735 area was a 9% deviation from its 40-week moving average, prompting calls for "decent" USD support for the time being. CAD was broadly weaker as the USD/CAD regained a footing above parity. The softer US initial claims data increased concerns about the impact on Canadian exports to the slowing US economy. The South African Rand was weaker as well after the S. African Central Bank left its key rate unchanged. USD/ZAR surged through the session to test above the 7.55 level as dealers noted that Eskom revoke its consent for its customers to exceed 80% of their regular power consumption. European Fixed income futures were firmer as weaker German retail sales data helped to provide a bid temperament.

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