Stocks Slip And Suddenly Everyone's Terrified Of Inflation: Here's What You Need To Know

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What happened? We were supposed to be concerned by deflation, and re-assured that the Fed would always be there to pump up markets. But today it looked like that fell apart.

But first, the scoreboard:

Dow: -7.2
NASDAQ: -6.93
S&P 500: -5.7

And now, the top stories of the day:

  • Everything started off as normal. Asian shares exploded to two-year highs overnight. The dollar got hammered against the yen, and gold exploded. You know, same-old same-old.
  • And it was pretty much the same story in Europe. No news is good news in Europe, and it’s been a long time there’s been much news.
  • Equities were a little bit above flat in the pre-market, but it began to deteriorate at 8:30 when the US got hit with a slew of economic data. First of all, the PPI came in hot, which boxes Bernanke in a bit, in terms of how much he can put his foot on the gas. Then the weekly jobless claims number came in weak, which suggests that a light version of QE is not an option. And then the trade gap came in very wide, a number that will hurt GDP and also set up retailers for an ugly Christmas season if they can’t move their merchandise.
  • From then on, things unfolded slowly to the downside. In the afternoon we saw an “ugly” 30-Year Treasury auction, with yields jumping considerably. Suddenly there’s A LOT of inflation talk, courtesy of gold, the weak dollar, and soaring commodities. And it seems that in this environment, demand for bonds yielding zilch aren’t so hot — especially the Fed doesn’t have room to go whole hog into buying them.
  • Along with that, the Foreclosure-Gate story really gathered steam, as investors are clearly now punishing shares of the major banks in anticipation of major costs ahead. Bank of America and JPMorgan were among the big losers.
  • In the end, markets came back a bit from their lows. All eyes on Google earnings after the close. Update: They’re good!

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