Given the slew of positive economic data Monday you might have been forgiven for expecting a decent rebound in risk assets. There was a rebound of sorts in early New York trading, with the Dow up close to 150 points at one stage. But the rally lost momentum and was largely undone. Indeed the Dow traded in the red for a period. Perhaps in part, this may have been due to comments made by a Fed official Jon Greenlee who told a House of Representatives Oversight and Government Reform subcommittee hearing that "credit losses at banking organizations continued to rise, and banks face risks of sizable additional credit losses given the outlook for production and employment… Poor loan quality, subpar earnings, and uncertainty about future conditions raise questions about capital adequacy for some institutions". More generally, fears about loan quality were corroborated overnight by the news that business bankruptcy filings jumped in October, reversing two months of declining commercial filings. Overall, the price action looked pretty poor to me. I'd have expected a much more positive reaction to the numbers yesterday

The past two sessions have confirmed the ongoing discrepancy between manufacturing and US consumer trends. US real consumer spending is barely higher than a year ago, yet the US manufacturing is now surfing above 55.0. This may reflect a rebalancing of the world economy (towards less dependency on the US consumer), yet I doubt it can happen so quickly. The optimists will argue that the consumer will finally join the party as stronger growth supports the income dynamics.

Stocks catching the eye in early US trading include Black & Decker which has soared on news that Stanley Works has agreed to buy them for $4.5bn. Natural gas producer Chesapeake may see some selling after reporting a 94% drop in Q3 net income. Note the stock was the top performer in its sector on the S&P 500 last quarter. Yesterday's star turn Ford (F) may be today's dog on news that the company plans to offer $2bn in convertible senior notes. Intel (INTC) is selling some selling on the back of being cut to "equal weight" at Morgan (MS) Stanley and Viacom (MTV and Paramount) may be well supported after reporting Q3 profits up 15% (beating estimates).US Factory Orders, released at 15.00, came in a smidgen better than expected at +0.9% MoM.

Today's Market Moving Stories

• The big news is that when stocks fall, Buffett puts his money where his mouth is and goes shopping. In a big big bet on railways, Berkshire Hathaway have gone all in to buy Burlington Northern Santa Fe Corp (BNI) in their biggest ever deal worth a staggering $44bn (a 30% premium on yesterdays $76 a share price). Looks like Warren is betting on another round of stimulus spending. Needless to say the rail sector (CSX, Union Pacific, Norfolk Southern, Genesee and Wyoming) will be very bid today.
• British retail sales will rise 1.9% over Christmas, bouncing back from last year's decline, but below the increases of the previous nine years, according to the Centre for Retail Research.