Last week we summed up some observations on the declining stock market. Today we take another look at the state of the market. Lead by the overseas markets we have seen a broad deterioration across the board.

Market corrections are almost always accompanied by higher implied volatilities. Adam Warner documents a pop in the VIX.

Brett Steenbarger at TraderFeed highlights the increase in new lows and the decrease in stocks still above their 50-day moving average.

Ticker Sense notes the P/E on the S&P 500 is at its lowest level since October 1995.

Eddy Elfenbein at Crossing Wall Street highlights the reversal in sector performance during this correction.

Not surprisingly a recent Merrill Lynch survey shows portfolio managers have grown wary of the emerging markets.

The question is what is caused this most recent decline. Caroline Baum at thinks the once-again inverted yield curve is a strong signal that the markets believe the Fed is going too far.

`The underperformance of cyclicals versus staples is the market's way of saying the odds have increased for a more severe slowdown,'' says Steven Einhorn, vice chairman of Omega Advisers. “Bernanke's language'' — the shift to tough anti-inflation rhetoric — “has frightened investors into thinking a hard- landing is more of a possibility,'' a view Einhorn does not share.

The bond market has come around to the stock market's way of thinking, albeit via a different, more circuitous route. For anyone who is paying attention — Fed officials, listen up — the yield curve is saying, “no mas.''

As of June 12th the Fed funds futures market was implying a greater than 70% chance of a 5.25% Fed funds rate for the June meeting. Judging by the market reaction they seem to think that this might be a rate hike too far.

Update:  The Peridot Capitalist also tags the Fed for the 100 point fall in the S&P 500.