Market Update

Futures are pointing down this morning after disappointing earnings from ArcelorMittal (MT) and UBS. UBS beat estimates with the help of an 825M franc tax credit, but its investment banking unit posted a surprise pretax loss of 406M francs due to 'very low levels of client activity' and a charge on the bank's own debt.

Meanwhile, UK GDP grew twice as fast as expected in Q3 at 0.8% and S&P reaffirmed the U.K.'s AAA credit rating and revised its outlook to stable from negative. Interestingly though, this could pressure the BOE to delay additional bond purchases. Goodbye stimulus?

The U.S. will report 3Q GDP on Friday this week, just ahead of the FOMC meeting on November 3rd. If we posted a better than expected 3Q GDP (unlikely given the durable goods orders data, etc over the past few months) on Friday, would QE2 expectations have to come way down, and in the process, bring the market way down?

Another two signs that expectations for further monetary stimulus in the U.S. may be overdone include comments from Nissan COO Toshiyuki Shiga this morning, "we can't adequately express our concern about the sharp yen rise on our earnings by simply saying...we are worried about it. The company is now working with a sense of crisis."
And, a 5-year TIPS auction yesterday was done at a negative yield for the first time ever. Investors bought $10B at (0.55%) on expectations for higher inflation (monetary stimulus). It will end up being a shame if these investors end up paying the government to loan it money...

On today's economic calendar we will have the Case Shiller 20 city home index and Consumer Confidence.

We will also have another round of POMO. The target of which will be longer dated treasuries.

Remember that the market tends to see its apex on POMO days at 8:30 PST. So, if we sell of hard in the morning, you might buy a few beaten down names going into the POMO (if they be tech or materials names...with MT down 5% pre-market, that could be a decent candidate...) and cover your shorts.