Abdullah Karatash

Stocks closed flat after trailing in the red for the majority of the day.

Corporate credit spreads closed unchanged to marginally wider; spreads are now at pre-crisis 2007 levels.

There is a lot of talk about an impending correction in the markets with several funds and players betting on it.

The rule of thumb of behavioral market psychology tends to be that when everyone (the herd) is hoping for / thinking of a correction, the market will go the other way…

Fear of a rally remains real with corporate credit likely to rip even tighter if stocks can break free and stage a full-fledged run-up.

The U.S dollar gained against the Euro to close at 1.35 as news emerged that Axel Weber's resignation was due to his hawkish stance on inflation; any replacement will be more of a dove when it comes to European interest rates.

Portugal will be buying back its sovereign bonds; that's a novel idea. Portugal will be lending money to…Portugal (then again, the Federal Reserve set the precedent with TARP / TALF / QE).

GE is to buy the deepwater drilling business of John Wood for $2.8 billion.

In LBO (leveraged buy-out) land, Clayton Dubilier announced its acquisition of ambulance staffer EMS for $3.2 billion.

Manufacturing company Honeywell sold $1.4 billion of debt in a two-part offering: $800 million 10 year debt at +68 and $600 million 30 year debt at +78.

Italian bank Intesa Sanpaolo tapped the markets and sold $2 billion of a 3 year FRN (floating rate note) at 3 month LIBOR + 240 and $1 billion of 10 year notes at +300.

In sovereigns, Mexico sold $1 billion of debt due in 2020.

Retail sales and business inventory numbers are out tomorrow. There is also a slew of inflation data that will be out in the U.S. mid-week.