Deleveraging Across All Asset Classes Continues

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The Shanghai Composite had its largest fall in over four years today, dropping 5.3% as Chinese government continued to inject liquidity to prop up its financial system. Fears of a credit crunch have pushed the Chinese index lower for the past four trading days. The major European markets were in the red as well. The FTSE 100 (INDEXFTSE:UKX) lost 2.12% on the day.

The Dallas Fed Manufacturing Survey came in better than expected this month, coming in at 6.5 vs. the consensus 0.0. The forward-looking new orders subindex rose to 13 from 6.2, and the employment subindex rose to 0.2 from -6.3.

The S&P 500 (INDEXSP:.INX) opened low and continued lower, trading down to as low as $1,560. After the European closing bell, markets began to recover and finished the day down 0.8%. The materials and industrials sectors were the worst performing sectors, both down more than 2%, with utility stocks around unchanged. Market breadth remained very negative with declining stocks outnumbering advancing socks on the NYSE 6.5 to 1.

The 10-year Treasury yield pushed past 2.6%, but came back down to finish at 2.53%. Longest-duration Treasuries continued to be the best performers as overall inflation expectations remain unchanged. Crude recovered from recent losses, and finished the day up 1.5%.

The Gloom, Boom and Doom Report's editor Marc Faber announced today that he believes the S&P 500 could fall 20% to 30% from current levels.

Tomorrow's Financial Outlook

Italian retail sales will be released at 4:00 a.m. EDT tomorrow morning.

US durable goods orders will be released at 8:30 a.m. EDT. New orders are expected to see month-over-month growth of 3.3%. The S&P/Case-Shiller home price index will be released at 9:00 a.m. EDT tomorrow morning. Economists expect the 20-city seasonally adjusted month-to-month growth to be 1.5%.

New home sales will be released at 10:00 a.m. EDT tomorrow morning. The Street expects new sales to come in at 460,000 after seeing 454,000 last month. The consumer confidence index is expected to report a reading of 75.0, after seeing a multi-year high reading last month.

Apollo Group Inc ( APOL ), Barnes & Noble, Inc . ( BKS ), Lennar Corporation ( LEN ), and Walgreen Company ( WAG ) are all releasing their quarterly earnings reports tomorrow.

Twitter: @Minyanville



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: APOL , BKS , LEN , WAG

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