A.M. UPDATE

Futures took a turn for the worse to risk off last night around the European open and it was none other than Banco Santo Espirito which (after Goldman and DE Shaw bought in) lost approx. 50%, down about 40% at one point in the European session as they reported a $bn dollar loss. For anyone who remembers when this first popped up about a month ago, you'll probably remember how quickly it effected European sovereign bonds along the periphery or in the PIIGS countries as well as US futures.

R2K futures overnight and at the European open (red arrow).

In addition Argentina's clock has run out and is officially in default.

As for Initial Claims, today was the first miss since the last 4 beats coming in at 302k with a 32k rise. In addition to that the Employment Cost Index showed the biggest rise since September 2008, something apparently the F_E_D did not know yesterday and only makes the hawkish case stronger, remember the "Slack" in the labor market comment? At the same time as the ECI's backward looking (quarter behind) costs rise, the BLS is telling us at the same time that real hourly wages are down, that should be settled on tomorrow's NFP at 8:30.

In my view this isn't any one risk event in particular and you shouldn't expect a straight line drop, but a lot of bouncing around and volatility, but the market structure is exceptionally weak, I was surprised last night by just how much market breadth had collapsed in a single day, many indications near or 1t 2014 lows while price is far from it, that's not good and as I pointed out, after 15 years of looking at these breadth indicators, I've only seen this to this degree twice, the last time was the 2007 top.