Wednesday’s stock sell-off has been extended. Equity futures are pointing to a lower open this morning after the S&P 500 shed 1% yesterday, a result of weak earnings from Citigroup and declining profits at Goldman Sachs....yet interest rates refuse to breakout of their recent range. 

More than two hours before the opening bell, S&P 500 futures are 1.2 points lower at 1,277.30 and Dow futures are down 21 points at 11,765. Despite yesterday’s loss, the benchmark S&P remains up 1.93% for the calendar year.

Benchmark Treasuries are also worse off this morning. The 10 year Treasury note is -6/32 at 93-29 yielding 3.361%. The FNCL 4.5 is -1/32 at 102-11.

Stocks in China dropped nearly 3% to a four-month low as investors are increasingly concerned that tightening monetary policy aimed at taming inflation will limit growth. Japan’s Nikkei 225 also fell 1.13%, while shares on Hong Kong fell 1.7%.

Key Events Today:

8:30 ― Initial Jobless Claims will be closely watched this week as the market attempts to discover what the underlying trend is. The index saw new claims for unemployment insurance jump 35k to 445k in the week ending Jan. 8 ― the highest level since late October. The expectation is that claims fall back this week to a level closer to the 4-week average of 417k.

“Either the claims numbers are just pure wonky (likely) or businesses are slashing payrolls again (unlikely, since this would fly in the face of every other jobs indicator),” said economists at BMO Capital Markets. “Nonetheless, after climbing for two straight weeks, jobless claims need to reestablish a downward trend before we can confidently anticipate a meaningful pickup in employment.”

Analysts from RDQ added, “Extracting signal from noise is often very difficult early in the new year so we will just observe that despite the sharp rise in claims, the four-week average rose only 5,500 to 416,500, which still puts it below the level seen in the survey week for December payrolls.”

10:00 ― Forecasts are divided for December’s Existing Home Sales Index. The index jumped 5.6% in November to 4.68 million ― the top reading in seven months. For some economists that jump was too big, suggesting a correction in December, while for others it was underwhelming in light of the 10.1% gain in October’s pending home sales index (the strongest predictor for the index).

“November’s increase of +5.6% in existing home sales actually underperformed what was implied by pending home sales so there is a chance that December will see an outsized jump to ‘catch-up’ to pending home sales,” said economists at BTMU. “In that case, existing home sales would finish out the year closer to the 5 million mark. Five million units is well above the housing correction low of 3.84 million units seen in July 2010, but miles below the bubble-induced high of 7.25 million in September 2005.”

Economists at Nomura, however, said December will see a bit of payback from the strong November figure. They add that normal month-to-month volatility will also play a role, as well as inclement weather in some parts of the country. The consensus forecast is to see an annualized pace of 4.83 million sales, which would mark the fourth increase in five months. Forecasts range from 4.50 million to 4.97 million. “Nonetheless, with sales likely to stay below 5 million annualized, it could take a while to sell off the overhang of unsold and vacant houses, meaning prices could sag further this year,” added economists at BMO.

10:00 ― The Philadelphia Fed Survey should be relatively stable in January. Analysts forecast the index to rise 0.7 points to 25, with predictions ranging from 15 to 32. The December index rose 2.2 points, much more than forecasters had assumed, as the component for capital expenditure expectations jumped to the highest level in five and a half years.

However, economists at Nomura point out that in the Fed’s Beige Book last week, the region’s growth was described as “erratic” and “choppy.” “We forecast the index of Philadelphia area manufacturing activity will likely decline by about 2 points to 18.5 in January from 20.8 previously,” they added. “On the inflation side, the prices paid index is expected to remain elevated at 50.0 in the month, inching up from 47.9 in the previous month.”

10:00 ― Leading Economic Indicators, a composite measure seeking to track turning points in the economy, is seen rising 0.7% in the final month of 2010. The index rose 1.1% in November, marking the strongest increase among five consecutive gains. Everything but housing appeared to contribute, one economist noted, as jobless claims declined, interest rates widened, and consumer confidence inched forward, while building permits declined. For December, economists at Nomura point to a gain based on lower initial claims, higher equity prices and widening interest yield spreads. Treasury Auctions: 1:00 ― 10-Year TIPS