U.S. stocks and exchange traded funds (ETFs) continued to slide into negative territory this morning as traders became cautious following a wholesale inventory report.

The Commerce Department reported that businesses cut inventories at the wholesale level for the 10th consecutive month in June.  However, on a positive note, U.S. non-farm productivity rose at a 6.4% annual rate, marking the biggest gain since the third quarter of 2003 and higher than analysts’ expectations of 5.3%.  Additionally, the Labor Department reported that unit labor costs, a gauge of inflation and profit pressures and is watched closely by the Fed, declined by 5.8%, marking the biggest decline since 2000.

On a separate note, the Federal Reserve began a two-day meeting that could provide insight on the direction of the economy.  It is expected that the Fed will hold interest rates steady and many are eager to see what policymakers say lies ahead.

Although the Treasury Department’s massive stimulus package has stabilized the financial system, it appears that troubled assets may still exist.  The reason behind this is because the government didn’t actually buy assets through the program. It instead invested money directly into the banking system, meaning banks still have their problem loans.  The Fed has warmed that if another downturn occurred and losses on troubled assets soared, there is a risk that banks could find themselves short of capital.  However, the panel said that this likelihood is slim and that 18 of the 19 biggest bank holding companies would probably have enough capital to withstand another downturn, reports Edmund L Adrews of The New York Times.

In currency news, it appears that some believe that the U.S. dollar has hit a bottom and will prosper for the next year or two.  Market analyst Robert Pretcher tells Yahoo Finance that he is bullish on the dollar because of certain patterns, improved sentiment and his view that the biggest risk to the economy is deflation, not inflation. To Pretcher, these are all signals that the dollar will rise.  An ETF to consider with a bullish dollar is the PowerShares DB U.S. Dollar Index Bullish (UUP) which is down 4.5% year-to-date.