The NMI registered 53 percent in September, 0.3 percentage point lower than the 53.3 percent registered in August, and indicating continued growth at a slightly slower rate in the non-manufacturing sector.

The Non-Manufacturing Business Activity Index increased 1.5 percentage points to 57.1 percent, reflecting growth for the 26th consecutive month. The New Orders Index increased by 3.7 percentage points to 56.5 percent.

The Employment Index decreased 2.9 percentage points to 48.7 percent, indicating contraction in employment after 12 consecutive months of growth. The Prices Index decreased 2.3 percentage points to 61.9 percent, indicating prices increased at a slower rate in September when compared to August.

According to the NMI, nine non-manufacturing industries reported growth in September. Respondents' comments reflect an uncertainty about future business conditions and the direction of the economy.

The massive stock rally sparked by yesterday's Financial Times article on EU Bank recapitalization continued to a very slight extent overnight. In fact, futures hovered around their 4pm levels for most of the night and stocks face a bit of an uncertain domestic open.

Given the extent of the stock rally yesterday, bond markets did an admirable job of holding their ground, but have unfortunately made up for it overnight. Here's where things sit now:

- 10yr yields are up 4 bps at 1.86 - Fannie 3.5's are down 4 ticks at 102-20

Could be better, could be worse. It's likely that the morning's domestic stock market movements could suggest some directionality in bond markets. One clearly positive factor is that MBS haven't been too volatile in terms of price movements, making it a bit easier for lenders to decide on rates this AM. Those should be roughly on time and flat to to slightly weaker.