Stocks closed in negative territory albeit off of their intra-day lows with the market unease over Europe continuing.

The U.S. debt ceiling saga did not weigh in on the markets as much as some made it out to; Treasury bonds continued to be well bid (and kept much of their weekend gains).

Cash bonds got smoked on the other hand with spreads widening some 10-20 basis points on liquid financial benchmark issues with investors rushing to sell bonds.

Interestingly some of the off-the-run vintage bond issues seemed to perform better relative to the more liquid on-the-run issues.

Broker dealers are clearly in risk reduction mode and real money investors appear to be reluctant to buy corporate bonds on price dips.

Most players are playing (or would hope to be playing) their positions close to home (flat).

With Treasury bonds trading where they are, corporate bonds do not look cheap on a dollar price basis (bond prices rise and fall in synch with Treasury prices on a dollar price basis).

Interestingly, several large European players are in the process of diversifying their holdings away from the European continent.

The Korea Housing Finance Corporation 5 year covered bond new issue saw a lot more European interest, in addition to the usual Asian suspects, than it normally would.

The Sumitomo 3 year and 5 year Yankee bond issues (USD denominated) also saw a lot of investor interest.

Granted, both issuers put in healthy concessions for investors unlike some recent bond issues that were priced far too tight and blew up spectacularly in secondary trading.

Players are not necessarily afraid of the fiscal situation of the European core per se, but they are worried about the exposure that European core countries (France, Germany etc.) have to the periphery.

Gold continued its run-up with prices closing above $1,600 an ounce, a new nominal record.

Silver prices surged as well to close more than 3% higher on the day.

Bond and CDS (credit default swap) spreads for Rupert Murdoch's News Corporation got hammered and spreads closed 40-50 bps wider.

Surprisingly News Corporation bonds held in well last week; the markets seem to have finally gotten the memo.

As Chris Matthews put it, Murdoch might have hit his "Stalingrad moment."

Rating agency Standard & Poor's announced that it was putting News Corporation on negative watch.

After the market closed earnings for computer giant IBM came out much better than expected with the outlook also looking good.

After today's bloodbath the markets should open with a better tone in the morning.

Unfortunately, networking systems giant Cisco announced 6,500 job cuts in a massive layoff; this summer will be ugly.

Housing start numbers are out tomorrow.