A few trends are being tested today, including the notion that we have decoupled from Europe and can climb off the canvas to finish strong after starting weak. I'm a little surprised that rumors of a downgrade of France's debt are hitting the market to the degree they have, even if it seems certain this time around. The irony is the White House made it official today by asking for the debt ceiling to be raised by $1.2 trillion to $16.4 trillion. The thing is there will be no major resistance from Congress. Instead, we are speeding down that road to Europe and to serfdom faster than ever. In FY11 America paid $454.4 billion in interest on its debt load, and now we are looking at $10.0 billion a week.

It's not inconceivable that very soon, once our rates increase and borrowing continues to run amok, we will pay $1.0 trillion a year—on interest! That's a mighty sum that used differently could cure all that ails the nation. Once again President Obama is playing political chess with this most devastating of economic developments by selling the idea he is trying to shrink government. In yet another power grab, the White House is asking for more power for the President to consolidate various agencies with the wave of a wand. The speech mentioned "real change" and that scared the heck out of me. Several agencies should simply be closed down, not merged into a giant agency that has a Czar that only reports to the White House.

I hope Congress doesn't take the bait on this even if they've had their hearts snatched on the debt ceiling.

Equities Slightly Pulling Back
By Carlos Guillen

Equity markets are continuing to trade slightly in the red during today's trading session as economic data shows rather mixed results and as an S&P downgrade of euro zone nations looms large.

According to the commerce department, the U.S. trade deficit widened 10.4 percent in November to the highest level since June as companies imported more expensive foreign oil. Imports accelerated by the most since May, rising 1.3 percent to $226 billion, while exports declined 0.9 percent to $178 billion. Clearly, the repercussions of the European debt crisis and the slower growth in China are coming together to reduce American exports. At the same time, our strong thirst for oil accompanied by higher prices served to lift imports here in the U.S. Perhaps, although it is encouraging to see that demand from within the U.S. is strong; boosting the need for supplies, material, car parts, and capital goods; it is not encouraging that companies are buying these products from abroad more than from home. On a more encouraging note, the trade deficit with China was slimmer, narrowing to $26.9 billion as U.S. exports to China rose to $9.9 billion, the highest in nearly a year.

Also here at home, the University of Michigan Consumer Sentiment January result landed at 74.0, which was higher than the Street's expectation of 71.2, increasing from the 69.9 reached last month, representing the fifth consecutive month-to-month increase, and standing at the highest level since May 2011. It is apparent that consumers, despite the still rough economic conditions, are becoming encouraged by the recent decrease in gasoline prices and by the continuing upticks in employment. The recent gains in equity markets are also serving to fuel confidence as consumer's perceived wealth improves. Clearly, the uptrend in consumer sentiment is very encouraging, but all is still not well. The economy is still shaky, and at the moment there is still the risk associated with the possibility of not extending the payroll tax holiday for the full year (this has been extended for the first 2 months of 2012). If this tax cut is not extended, all bets are off, and the economy can easily make a turn for the worse.

At the moment, while it is not official, the S&P ratings agency is likely to downgrade a number of European nations including France and Austria. This is likely adding pressure to equity markets as the European Sage continues.

Europe's Ills Widen Trade Deficit
By David Urani

The US trade deficit rose to $47.8 billion in November, up from $43.5 billion in October, and above the $45.0 billion consensus. But at least overall trade was up, and that included the highest level for imports going back to 2008. One of the main factors of the deficit was the 3.7% price increase on imported oil. Beyond that the main driver was probably auto sales, which were weak in Europe and lowered our exports there, along with higher demand for foreign cars here at home. Then of course there's the obvious trend in the dollar, which has been surging ever since the end of October as the problems in Europe weigh on the euro.

On that note, with today's telegraphed EU downgrades by the S&P, the euro is taking another 1.2% dive. That leaves the currency at its lowest level in more than a year. Consequentially, the outlook for the trade balance through November into January so far is looking less optimistic.

Dollar to Euro

The good news is that while Europe struggles for demand for our exports, our trade relationship with emerging markets is on a positive path. Our trade deficit with China fell by 4.3% for the month to $26.9 billion. This is still somewhat of a high deficit, but exports did jump to the highest level since December 2010.