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Stocks traded lower on the day by 0.5% as inflation fears crept into the market, the NY Manufacturing Index plummeted and the dollar surged.  Curiously, gold and oil did not trade down on the day in what appears to be a bit of an oversold bounce following the ~10% corrections in both.   Despite the fears, the VIX barely budged on the day.   Volume was once again very light and breadth favored the bears by a small margin.  The sideways churn continues….

U.S. Economy
The U.S. Labor Department said that producer prices were up 2.4% in November from a year ago, more than expected and the first positive annual gain in a year. The March 2011 eurodollars closed down .05 at 98.305.

The Federal Reserve said that industrial production was up .8% in November, stronger than expected. Utilization increased .7 to 71.3% of capacity. The March U.S. T-bonds were down 15/32nds at 117.18/32nds.

The National Association of Homebuilders sentiment index dropped from 17 to 16 in December, the lowest since June. March lumber was down $1.30 at $237.80.

The Federal Reserve begins its two-day meeting and is expected to keep the federal funds rate unchanged tomorrow at .125%.

The U.S. Treasury sold $27 billion of 1-year T-bills at a median yield of .39% with a bid-to-cover ratio of 3.08.

Wells Fargo said that it will be paying back the $25 billion of TARP funds that the government provided last year and plans to issue over $10 billion in new stock.

Grains and Cotton
The USDA said that China bought 290,000 tons of U.S. soybeans and Taiwan bought 120,000 tons of U.S. corn. March soybeans ended up a quarter-cent at $10.62.

After yesterday’s close, the USDA said that 92% of the nation’s corn crop was harvested, but 40% of North Dakota’s corn was still in the fields. March corn was down a penny at $4.075.

February cattle closed up .97 at 84.92 while cold temperatures in the north central U.S. continue to make it hard for livestock to gain weight. February hogs closed up 1.55 at 67.42.

March coffee closed up 1.35 cents at $1.4725, near its contract high, helped by increased talk of tight world supplies and the approach of winter in the northern hemisphere.

In today’s monthly oil market report from OPEC, the estimate for world oil demand was kept unchanged at 84.3 million barrels per day (mbd) in 2009 and 85.1 mbd in 2010. Those estimates are also similar to the U.S. Energy Department’s. February crude oil closed up .83 at $72.69.

Yesterday’s 6 to 10 day forecast from the National Weather Service expects below average temperatures for the eastern half of the U.S. February natural gas closed up 17.6 cents at $5.578.

The U.K.’s Office for National Statistics said that consumer prices were up 1.9% in November from a year ago, the biggest annual gain in six months.

Statistics Canada said that its composite index of leading indicators was up 1.3% in November, stronger than expected and the sixth consecutive increase. Also, labor productivity was down .2% in the third quarter and vehicle sales were up 3.5% in October. The March Canadian dollar ended down .16 at 94.21.

The March euro fell 1.20 cents to $1.4523, pressured by growing concerns over financial problems in Greece.

Source: Daily Futures

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