Economic Realities Hit Markets

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Wednesday, Sept. 27.

State of Play

Stocks sold off yesterday after new home sales fell short of estimates and the CB Consumer Confidence Index came in at its lowest level since May. It was the worst bout of selling in a while as the Nasdaq and S&P 500 gave up ~1.5% each. As of 0625 sentiment is looking to rebound:

• Stock index futures are pointing to gains, with the S&P, Nasdaq, and Russell 2000 up 0.3% each;

• Commodities are showing signs of life as well, with WTI crude oil up 1.5% to trade around $91.50/barrel. Copper is unchanged;

• Bonds are seeing a few bids. The yield on the 10-year is down 6 basis points to 4.50% (yields move inversely to prices).

It may just be a matter of time before the economy hits a brick wall

Beware the bear market head fake. During bear markets, futures often flash green in the pre-market and at the open before giving way to fresh bouts of selling. We aren’t in a bear market yet, but if the market starts to behave like one…

Known Events

There isn’t much on the calendar today. Durable goods orders are out at 0830. That’s about it. Economists expect a small decline (0.5%) month-over-month. Core durable goods orders, which exclude transport items, are expected to hold steady (0.1% MoM).

Seeing how it’s Wednesday you can look for MBA mortgage data at 0700. Mortgage applications increased by 5.4% last week, with the average 30-year mortgage holding steady at 7.3%.