Equity futures look set to erase yesterday’s afternoon losses. 

Ninety minutes before the opening bell, Dow futures are soaring 101 points higher at 10,159 and S&P 500 futures have jumped up 13 points to 1,076.90. 

They’ll have to do a bit better than that though. The Dow shed 109 points yesterday while the S&P fell almost 14 points. The three data points set for release today won’t make that easy either. Jobless claims are anticipated to rise, secondary market home sales should tumble rapidly, and a broad gauge of growth is expected to fall for the first time in 15 months.

Treasuries are giving back some of the gains experienced yesterday. The 2 year note, which hit a new record low yield yesterday, is -0-01 at 100-03 yielding 0.576%. The benchmark 10-year note is -0-10 at 104-30 yielding 2.914%. The 2s/10s curve is 2bps steeper at 234bps.

Mortgages have also opened lower. The September delivery FNCL 4.0 is -0-03 at 101-20. The FNCL 4.5 is -0-02 at 103-21.

Meantime, Light crude oil is up 0.51% to $76.94 per barrel, while Spot Gold is flat at $1,191.60.

Overnight, Treasury yields rose slightly but remain at nearly unprecedented levels.

“Treasuries have given back a fraction of yesterday’s sharp gains, when fears of a double-dip recession drove 10-year rates down 11 basis points to new 14-month lows of 2.87%,” said economists at BMO, noting the level is almost one full percentage point down from the start of the year and that the 2-year yield sunk to an all-time record low at 0.56%.

Key Events Today: 

8:30 ― After months of disappointing numbers, the weekly Jobless Claims report finally reported a better-than-expected headline last week when the Labor Dept. said there were 429k claims in the week ending July 10 (a weekly fall of 29k). Unfortunately, practitioners of the dismal science had to point out seasonal distortions owing to the annual retooling of auto manufacturing plants, rather than actual labor growth, were the likely driving force. Economists expect a return to the 450k trend this week, though others point out that seasonal issues could take another few weeks.

“Barring some sort of fluke, claims will rebound this week, but the size of the move is anyone’s guess,” said Ian Shepherdson from HFE. “We tentatively look for an increase to about 460k, the underlying trend from 429k.”

Even if the headline numbers remain near last week’s levels, economists at BBVA point out that the historical average is 361K claims. 

“The labor market is expected to be at the forefront of the Fed’s agenda and could play an important role in future interest rates and policy decisions,” they added. “The current expectation of a slow labor market recovery supports the expectation of low rates for a prolonged period of time.”

9:30 ― Ben Bernanke, chairman of the Federal Reserve, offers Wednesday testimony again, this time before the House Committee on Financial Services at the U.S. House of Representatives.

“The gist of the Chairman’s message is that, even though the Fed has revised down its growth outlook and a majority of members see downside risks to the outlook, no further policy stimulus is imminent,” said analysts at BMO in recapping yesterday’s testimony.

“In the Q/A the Chairman mentioned that a double-dip is “not a high probability event”. But neither is it a low probability event, and disappointed equity investors were looking for some discussion about what the Fed would do if the economy stalled—not a rehash of its exit strategy.” 

10:00 ― Economists are expecting a deep plunge in the Existing Home Sales Index. In May the index dropped 2.2% from 5.79 million annualized sales to 5.66 million. With the end of the homebuyer tax credit, a major decline to 5.10 million is anticipated by analysts polled by Reuters. Much uncertainty is reflected by predictions, which range from 4.25 million to 6.20 million.

“A very large drop in existing home sales is coming, the only question is when,” said economists at Nomura Global Economics. “The existing home sales report measures contract closings, and in order to receive the federal homebuyer tax credit, buyers needed to close their sales by the end of June. This month's report could therefore show an increase in closings as buyers rush to capture the credit, or a modest decline, as more time has passed since the original signing deadline (end-April).”

Analysts at IHS Global Insight said the 30% decline in the Pending Home Sales Index for May, plus the recent slide in the Mortgage Bankers Association's Purchases Index to a 13-year low, indicate a plunge in existing home sales by July: “We are expecting a 10% drop in existing home sales in June, and a similar, perhaps even worse, hit in July”

10:00 ― The final data release of the week is the Leading Indicators Index, a composite measure that seeks to gauge overall trends in the economy. Unfortunately, those trends are expected to be negative. Economists polled by Reuters look for a 0.3% drop in June, a drop sparked by the stock market, a slowdown in manufacturing, and weak housing demand.

“After rising for fourteen consecutive months, the index is forecasted to drop 0.4% due to widespread weakening across components,” said economists at BBVA. “Initial jobless claims rose, the S&P500 dropped, manufacturers orders slowed and building permits are expected to drop. This result would be consistent with our expectation of a slower recovery in the second half of the year.”

11:00 ―  Treasury announces the terms of the upcoming auction cycle:  2 year Notes on the following Tuesday, 5 year notes on following Wednesday, and 7year notes on following Thursday