By Greg Peel

The Dow closed down 46 points, or 0.3%, while the S&P lost 0.6% to 1502 and the Nasdaq fell 1.0%.

There is a certain irony in the impetus for yesterday's world-wide stock market plunge -- that being talk in the Fed minutes of "when" rather than "if" QE programs will be wound back. Sure ? Wall Street would not have been able to recover almost back to its all-time highs without successive adrenalin shots of QE since 2009, hence it seems logical that an end to those shots would imply a retreat. But if the Fed is getting antsy about too much QE it can only imply that the US economy is getting closer to the point at which it can once again stand on its own two feet, at least in the central bank's view. That should be a positive sign, not a negative sign.

Patients are given pure oxygen to stop them for dying and to stabilise their condition. But oxygen is ultimately poisonous and hence must be withdrawn before too long. It is hoped that once withdrawn, the patient can once again breathe on his own. The poison of QE is inflation. If the US economy is now stable, and not at risk of plunging back into recession, then it's time to withdraw the stimulus before inflation suddenly spikes out of control.

Hence there has only been talk of "pullback" around Wall Street, not "bear market". Then it simply becomes a matter of "by how much?" The more investors hear that "a pullback provides a good buying opportunity," the more it is likely a pullback will only be brief. Maybe 5% instead of 10%. It's not an exact science. The S&P closed just a tad over 1500 last night, having traded lower intraday. If 1500 breaks as a closing level, we'll be going down.

During the session, the Dow was down almost 100 points in the morning but only down 13 points in the last half hour ahead of late selling. The first eager buyers must be scouting for opportunities.

As far as Australia is concerned, our 2% plunge yesterday was a lot more dramatic than Wednesday's Wall Street session implied. But even as the S&P 500 has stalled over the past couple of weeks, the ASX 200 has surged on, pushing through 4900, thundering through 5000, and peaking out just over 5100. Positive earnings results (vis a vis expectations, not absolutes necessarily) have come at a time investors were beginning to overdose on the red cordial. If we were to settle momentarily at just under 5000, Bridge Street will be more in line with Wall Street. That extra 2% was really just a blow-off.

The interesting factor to consider is commodity prices. More on that in a moment.

Sales of US existing homes ticked up a modest 0.4% in January to further reinforce the suggestion of a bit of a breather in the US housing recovery. Sales in 2012 totalled 4.66 million, which is the highest number since 2007.

Economists were expecting a return to the positive for the Philadelphia Fed manufacturing index, but a fall in new orders sent the number lower, to minus 12.5 from minus 5.8 in January. This weakness was reflected in nation-wide numbers, with a flash estimate of the US manufacturing PMI for February falling to 55.2 from 55.8.

More disappointing was the eurozone equivalent, which fell to 47.8 from 47.9. It doesn't seem like enough to panic about, but that number has been quietly edging up towards the end of contraction (50) for months now, so a tick-back is a little disquieting, particularly after the woeful eurozone GDP number for last quarter. European stock markets had already closed on Wednesday night when the Fed minutes were released, so a catch-up was needed last night. Add in the weaker PMI and London fell 1.6%, Germany 1.9% and France 2.3%.

HSBC released its China service sector PMI yesterday, which caught me out because I had suggested the manufacturing number would be released. Sorry about that, but clearly the New Year holiday delays calculations. HSBC's services number rose to 54.0 from 51.7, so that's good news.

The weak eurozone PMI sent the euro lower last night, so despite a big jump on Wednesday night, the US dollar index is up another 0.4% to 81.41. Gold rebounded slightly nevertheless, rising US$4.10 to US$1575.50/oz, while the Aussie is steady at US$1.0240. But back to those commodities.

It has been noted more than once in FNArena recently that the rapid-fire February run-up in the ASX 200 was totally unsupported by commodity prices. Commodity prices hadn't fallen, but Australian stock markets in the 21st century do not see bull markets without commodity price support. And now, prices are falling. Indeed, plunging.

US dollar strength has been the trigger, but there's a sense of a tip-over in commodity prices this week with large commodity funds likely joining the "pullback" chorus. Base metals have fallen all week and did so again last night, with further 1-2% moves. The latest run-up in the iron ore price has also come to an abrupt halt, with spot falling US$2.70 to US$156.20/t.

Given oil prices had been pushing higher, OPEC spoke this week of possible production increases. That alone is enough to send crude prices lower, notwithstanding a stronger dollar and the general pullback mood. Last night Brent fell US$2.07 to US$113.53/bbl and West Texas, now on an April front month, fell US$2.15 to US$93.07/bbl.

After yesterday's local carnage, the SPI Overnight is down 6 points.

The gloss has gone off a bit, but the local earnings season continues today. Billabong ((BBG)), Lynas ((LYC)) and Santos ((STO)) are among the list of today's reporters.

Rudi will appear on BRR's Round Table at 1.30pm today.