Weak Homes Sales Overshadow Strong Earnings Reports

There were some very good earnings reports this morning, and the market looked like it could get a boost. But once the weak home sales report came out, a wave of selling swept over the market. Nothing big, but it's still early.

Existing home sales fell -8.4% last month, the biggest decline since January 1989. Some of this decline was expected, as the sales figure was slightly below consensus (6.12 million vs. 6.45 million). Median home prices fell by a much smaller -0.3%. Looks like the bottom in the housing sector hasn't been made yet.

Before this report came out, there were some very nice earnings reports. AT&T (T) and DuPont (DD) both topped expectations, and Texas Instruments (TXN) not only beat estimates but raised Q2 guidance. This is really helping the semis this morning. Also, Express Scripts (ESRX) raised its full-year outlook.

On the downside, Target (TGT) said April sales will be "much weaker" than expected. I was surprised by this, as retail sales have looked strong lately. I am still trying to get a sense if this is just a company specific issue.

Asian markets were flat overnight. Oil is up a bit to $66.18, which is a negative. The market won't like it if oil keeps creeping toward $70. And bond yields are lower again, with the 10-year falling to 4.62%.

If the market doesn't sell off more on the home sales and TGT news, we could see another quick short-covering rally. My best case scenario would be for more sideways consolidation before the stairstep higher action resumes.