NYSE cuts order execution time to 5 milliseconds

Equities finished significantly lower with the Dow down 2.5%, the S&P plunging 2.8% and Nasdaq tumbling 2.7%. The S&P opened the session lower after the worst-than-expected NonFarm Payrolls data and continued to fall sharply in the first hour of trade. The pace of decline slowed in the afternoon but the index continued to make lower lows. All ten sectors in the S&P500 were negative with Energy stocks plummeting 4.4% and Consumer Discretionaries falling 3.7%. At 10am, June ISM-NonManufacturing Index is expected at 47.5 from 44. New Orders are forecast at 44.4 and Prices Paid is predicted at 46.9.

The Greenback strengthened ahead of the June employment report - and moved stronger following the worse-than-expected result. Trading will continue in Europe overnight; however, the US market will be closed tomorrow for the July 4th holiday. EUR/USD dropped 140 pips to near figure 1.40 following a Moody's downgrade of Ireland's debt. CABLE lost 80 pips to figure 1.64; while USD/JPY dropped to close just below figure 96.

Supply, supply, supply is the focal point next week amid an otherwise light data and Fedspeak calendar. The Treasury could sell over $170 bln in bills, notes, bonds, and TIPS next week, assuming a $35 bln 4-week bill auction (details announced Monday). For the first time ever, the debt managers will conduct 4 coupon/TIPS offerings. Despite the advent of this massive supply, yields are still sharply lower as stocks are down over 2%. Monday's ISM Non-Manufacturing index highlights the data calendar. The rest of the week is virtually empty until Friday when trade, import and export prices, and consumer sentiment will be released. Other factors that will influence trading are the start of earnings season, and the G8 meeting.

Acura sales up 13%

From the FDIC: "The FDIC Board today authorized publication of a Proposed Statement of Policy on Qualifications for Failed Bank Acquisitions. This proposed policy statement would provide guidance to private capital investors interested in acquiring or investing in the assets and liabilities of failed banks or thrifts regarding the terms and conditions of the investments or acquisitions. "How investments in insured depository institutions are structured is critical for the banking system as well as the FDIC," said FDIC Chairman Sheila C. Bair. "We are particularly concerned with the owners' ability to support depository institutions with adequate capital and management expertise. This proposed policy statement is intended to provide those essential safeguards. We are trying to find the best way to have a balanced approach, and we look forward to comments that can help us accomplish that." "The FDIC has reviewed various elements of private capital investment structures and considers that some of these investment structures raise potential safety and soundness considerations and risks to the Deposit Insurance Fund (DIF) as well as important issues with respect to their compliance with the requirements applied by the FDIC in its decision on the granting of deposit insurance. "Under the proposed policy statement, the FDIC would establish standards for bidder eligibility in connection with the resolution of failed insured depository institutions, which provide for: capital support of the acquired depository institution; agreement to a cross guarantee over substantially commonly owned depository institutions; limits on transactions with affiliates; maintenance of continuity of ownership; clear limits on secrecy law jurisdiction vehicles as the channel for investments; limitations on whether existing investors in an institution could bid on it if it failed; and disclosure commitments. "The FDIC is keenly aware of the need for additional capital in the banking system, and the contribution that private equity capital could make to meeting this need provided this contribution is consistent with basic concepts applicable to the ownership of these institutions that are contained in our banking laws and regulations, and now summarized in the proposed Policy Statement."

Fed-speak will be at low ebb after the holiday weekend with only one speaker slated to make an appearance next week, Governor Duke. The moderate permanent voter and former ABA chairwoman will be speaking before the FDIC 2009 conference on minority lending at 9 ET on Thursday, July 9, though the exact topic of her speech has not yet been revealed.

After allowing for today's spike higher following weak payrolls that cracked the Jun 29 high at 116-23 and may challenge the May 29 high at 117-04, a sell-the-fact reaction from 116-23 to 117-04 (vs 116-31+ high) should trigger a bearish reversal. A sustained violation of 115-21+ will renew the longer term downtrend, but it will take a drop beneath the Jun 25 low at 114-26+ to confirm that a bearish bias has indeed resumed.

Ford sold 27k cars in June, marking a 25% jump in y/y sales and the first increase for '09.

"Lower mortgage rates are helping to support the housing market," said Frank Nothaft, Freddie Mac VP and chief economist. "The 30-year fixed-rate mortgage rate peaked this year over the week of June 11 and are now around a quarter of a percentage point lower this week. This has led to a 7.2 percent increase in conventional mortgage applications for home purchases by the last full week of June, according to the Mortgage Bankers Association."

More bearish "call" selling has been reported against the grain of the strong rally in Treasury futures and steep slump in stocks. It would appear that those on the options side are still intent on gearing up for a classic post-payrolls whipsaw, though bond futures are right back at highs. Sources cite a sale of 2k in Aug 119 "calls" on 10s and a 3k offer of Aug 117 "calls" back-to-back, with the Sep 10s last up 15-ticks at 116-24 and cash T-note yield down to lows near 3.48%.

Treasury announced a $65 bln 3-pronged package of coupons, as well as an $8 bln 10-year TIPS. The Treasury will sell $35 bln in 3-year notes on Tuesday, $19 bln in 9-year 10-month notes on Wednesday, and $11 bln in 29-year 10-month bonds on Thursday. All of those are unchanged from June levels. The TIPS, to be auctioned Monday, are also unchanged from their January level, the last time a new issue was sold. Additionally, the Treasury will sell $63 bln in 3- and 6-month bills on Monday, that's up $1 bln from this week's amount, with the increase in the 6-month tranche, bringing it to $31 bln. Next week's auctions could total $171 bln, including the 3- and 6-month bills, and assuming a $35 bln 4-week bill sale. Treasury yields are still sharply lower on the day, focused more on the weak employment data and looking to cover positions into the long weekend. After the well subscribed coupon auctions a couple of weeks ago, it looks as though the Street is confident this paper can be absorbed with little difficulty.

European debt futures are up on the day with Bunds outperforming after today's ECB announcement, which confirmed that rates are on hold for a protracted period. Gilts underperformance was supported by the 30-year Gilt auction (which sent Gilts sharply lower), BoEspeak and credit conditions survey (see below). Today's European calendar had eurozone May producer prices, which dropped to -5.8% y/y (median -5.6% y/y) from -4.6% y/y in the previous month. Meanwhile, the unemployment rate jumped to 9.5% (median 9.3%) In the U.K., the BoE Q2 Credit Conditions Survey showed increased availability of corporate credit, but rising spreads, meanwhile the construction PMI fell back to 44.5 in June, from 45.9. Elsewhere, the Riksbank unexpectedly cut the repo rate by 25bp to 0.25% (median was for a steady 0.50% rate) and the SNB suggested it may broaden its range of collaterals. As of 15:23GMT the September 10-year Bund future is up 72 ticks on the day at 121.64, while the corresponding Gilt future is up 26 ticks at 117.64. In the cash market the 10-year Bund yield is down 8 bp at 3.33% and the 10-year Gilt yield is down 3 bp at 3.74%.

S&P states that the "credit outlook for the corporate and government sectors and for financial institutions remains negative with credit deterioration continuing for the remainder of 2009."

The 70 bcf net injection was on the low end of the range of expectations and under the 85-bcf five-year average level -- a supportive number. The issue here is the extent to which this may have been a one-off event, with the extreme heat in the south-central US last week now past.

Crude Inventories are expected to fall 1.5mln following a 3.868mln draw prior Unleaded Inventories are expected to rise 1.7mln following a 3.871mln increase prior Distillate Inventories are expected to rise 1.7mln following a 2.077mln rise prior Refinery Utilization is expected to rise 0.25% following a 1.15% rise prior

ONEX Corporation is up 1.38% and RBC is 0.50% higher.

Factory Orders came in better than expected in May, rising 1.2% to $347.9bln following a downwardly revised 0.5% increase to $343.8bln in April. Factory Orders Ex-Transports posted a 0.8% increase to $305.5bln while the April figure was revised down to a 0.2% decline to $303bln. Ex-Defense new orders gained 1% over the month following a 0.1% decline in April, Durable Goods orders gained 1.8% to $163.4bln while Ex-Transport Durable Goods Orders posted a 1.1% increase to $121bln. Factory Orders have now risen three of the past four months but are still down 23.3% on a year-over-year basis. Also of note, Ex-Transport Orders are higher for the first time in three months, while Ex-Defense Orders are higher for the first time in ten months. May Shipments were revised to show a 2.5% decline to $168.9bln, reflecting the tenth consecutive monthly decline. Unfilled Orders posted a modest 0.2% decline over the month, and are lower for the eight consecutive month. Inventories posted a 1% decline to $322.1bln in May with inventories of primary metals leading the drop. Inventories of manufactured non-durable goods rose for the first time in eight months.

TSX Down 1.23% led by Energy (down 2.43%). Industrials fell 0.98% and Materials is 0.96% lower. IT and Financials fell 0.90% and 0.88% respectively. Health Care dropped 0.80% and Consumer Discretionary declined 0.41%. Telecommunications is 0.11% higher.

• May Factory Orders are expected to rise 0.6% following a 0.8% increase in April and a 1.9% decline in March • Factory Orders Ex-Transports are expected to rise 0.2% following a 0.1% increase in April • May Shipments are expected to fall 1.1% following a 0.3% decline in April and a 1.8% decline in March • Factory Inventories are expected to decline 0.8%, while the I/S ratio is expected to be unchanged at 1.45 The larger than expected jump in May headline Durables goods, as well as ex-auto orders have paved the way for the second consecutive monthly increase for headline Factory Orders in May, while the ex-autos component is likely to report a more modest increase in May relative to the headline. On the other side of the fence, continued declines in factory shipments are likely to show declines similar to the May Durable goods report in which shipments fell 2.1%. Factory Inventories are also expected to reveal further retrenchment over the month as the outlook for inventories remains considerably bleak.