The Philly Fed survey hit at an 18-year low, dropping to a reading of -37.5. The data completely overshadowed better-than-expected U.S. jobless claims and lower consumer inflation numbers. U.S. jobless claims fell by 16,000 in the week ending Oct. 11, coming in at total of 461,000, below the consensus of 470,000. Headline CPI for September came in flat while economists were expecting a 0.1% increase. Monthly core CPI, the inflation measure most closely watched by markets, fell more than expected, rising 0.1% versus expectations for a 0.2% gain.

Jimmy Tintle, futures broker for Transworld Future.com said choppy trading in equities shows that markets are trading off the bottom. He said he is still expecting markets to close in positive territory.

"I don't think investors want to see the Dow close below 9,000 again," he said. "I think from here we move higher."

Colin Cieszynski, market analyst from CMC Markets Canada, said he is expecting markets to hold key support levels, which could point to a rally in equities.

"Initial trading signs had suggested that some of the negative sentiment that had gripped markets of late may be easing," he said. "However, there would be a risk of a retest of the 2002 lows which were near 7,800 for the Dow and 780-800 for the S&P."

The Dow Jones industrial average is down 16 points to 8561, the S&P 500 is down five points to 903 and the Nasdaq is up eight points to 1637.

In Canada, the S&P/TSX composite index is down 281 points to 9043.

European stock markets closed with the Eurostoxx down 112 points to 2137, the UK FTSE 100 down 218 points to 3861 and the German DAX down 239 points to 4623.

According to some fixed income strategists, the big surprise of the day is that treasuries have not benefited from weaker equities. Guy LeBas, fixed income strategist from Janney Montgomery Scott, said the dislocation in the markets is a sign that some fear remains, but the flight to quality move is "overdone."

"I think these moves are caused by investors withdrawing their capital as a whole," he said. "They are deleveraging, selling equities and not going into anything else."

Looking at market moves today, LeBas said he thinks the concerns of the credit crunch are starting to abate and now people will focus on economic data, which he added continues to show weakness.

"We are in trouble economic times at least and we should be able to focus on that instead of just the day to day issues," he said.

U.S. two-year yields are up 0.7 bps to 1.56%, with five-year yields down 1.4 bps to 2.81%, 10-year yields down 1.2 bps to 3.93% and 30-year yields up 2.5 bps to 4.22%. The Eurodollar March 09 contract is down 2.0 ticks to 97.65. The yield curve is flatter, with the 10/2-year spread down 1.7 bps to 236.97 bps.

The Canadian 10-year note is yielding 22.68 bps less than the U.S. 10-year note.

Yields on two-year Canadian government bonds are down 4.6 bps to 2.23%, with five-year yields down 6.2 bps to 2.89%, 10-year yields down 5.6 bps to 3.71% and 30-year yields down 2.7 bps to 4.16%. The December 08 BAX contract is up 0.5 ticks to 97.51.

In Germany, returns on two-year German bonds are down 20.8 bps to 2.92%, with five-year yields down 12.2 bps to 3.58%, 10-year yields down 5.2 bps to 4.07% and 30-year yields down 1.6 bps to 4.61%.

Yields on UK two-year bonds are down 4.2 bps to 3.80%, with five-year yields down 7.4 bps to 4.40%, 10-year yields flat at 4.71% and 30-year yields down 9.5 bps to 4.57%.

Oil prices continue to slide as prices dipped below $70 a barrel following the DOE crude oil inventories. For the second straight week, U.S. crude oil supplies increased by a much larger-than-expected margin, rising by 5611k barrels in the week ending Oct. 10 against expectations of a build of 2600k.

WTI crude oil is now down $4.44 to $70.10.

In other commodities, the front month gold contract at the Chicago Board of Trade is down $48.70 to $802.00 per ounce.

Currency markets haven't moved much with most currencies trading within today's range. The Canadian dollar is up 0.0032 to 0.8414 against the U.S. dollar (1.1883 USD/CAD) and up 0.85 to 84.75 against the yen.

The U.S. dollar is up 0.76 to 100.71 against the yen and the Dollar Index is up 0.427 to 82.477.

The euro is down 0.0082 to 1.3418 against the U.S. dollar, down 0.0139 to 1.5943 against the Canadian dollar, down 0.0028 to 0.7789 against the pound sterling and is higher by 0.18 to 135.12 against the yen.

The pound sterling is down 0.0044 to 1.7224 against the U.S. dollar and down 0.0109 to 2.0466 against the Canadian dollar.

All data taken at 12:47 p.m. EDT.

Neils Christensen, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it

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