U.S. stocks rallied early on Cisco’s (CSCO) slightly better than expected report. The stock was initially up 8% while half of those gains were lost by the end of the trading day. Reality returned proving any early rally merely provides another exit. Some bulls like to point out when Obama was elected in 2008 stocks dropped 5% so the reelection should be nothing to worry about it. They neglected to mention stocks kept dropping for the next 5 months. After the news conference Wednesday investors saw little in Obama’s comments to assuage their fiscal cliff concerns, so selling intensified. This press conference followed on the heels of Geithner’s comments Tuesday that everything will be fine once we raise taxes.

Markets reacted strongly to Israeli attacks on Gaza which killed a Hamas leader amping-up the region’s violence. Further, Egypt has made threats to Israel, including recalling its ambassador, over the Gaza attacks. This naturally caused an immediate spike in crude oil (USO) which given energy’s high weighting also rallied commodities (DBC) overall. The dollar (UUP) was flat while gold (GLD) rallied modestly. Also in currency markets the yen (FXY), (YCS) fell as the BOJ and government entered massive stimulus. The Chinese yuan (CYB) also established new highs on no particular news. The yuan has been rallying modestly almost every day the past couple of months and now is at an all time high. Some of this may be due to repatriation on concerns regarding the economic stability within the U.S. and eurozone. Bonds (TLT) and (IEF) were basically flat but the high yield sector (HYG) continues to trade more with stocks and fell.

Overseas eurozone shares were weaker as Industrial Production in the region declined the most in 3 years, down 2.5%. The UK’s Bank of England lowered future GDP growth due to the ongoing financial crisis—and, here I thought this was over. The yen weakened as Japan boosted its stimulus package. In China the 18th Party Congress ended with few surprises. The China Construction Bank offered some “happy talk” stating it was confident it could contain problem loans.

Retail Sales were weaker (-.3% vs -.1% expected & prior 1.1%) and ex-autos/gas (-.3% vs -.1% expected & prior .6%) so take your choice. Below is a chart demonstrated how Consumer Confidence and Retail Sales are coming together.

The PPI (-.2% vs expected -.1% expected & prior -.2%) and the silly “core” PPI (.-.2%% vs .2% expected & prior .0%) again take your choice. Within the data food prices (not that you eat) were higher by .4%. Business Inventories were higher (.7% vs .6% expected & prior .6%) so dependent on your view, not much to read into this report. Lastly Fed Minutes released this afternoon suggested an extension of QE to infinity.

Stock market sectors leading the way lower included, well, just about everything. Oh wait, Abercrombie & Fitch (ANF) rallied but this didn’t help retailers (XRT) much overall.

Volume was only slightly above recent averages while breadth per the WSJ looks like it posted an ugly 10/90 day away from the Nasdaq. On this note let me say markets are now much oversold short term as RSI’s and NYMO demonstrate. So, perhaps there’s a rally in the cards soon enough. We’re both short and long currently but also have high cash balances.

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