Housing Woes Weigh On The Market

The Case-Shiller home price index came out this morning, and showed U.S. home prices fell -3.2% in Q2. That might not sound like such a large figure given the appreciation we've seen in home prices over the last several years, but it marks the largest decline in the index's 20-year history.

The financials are also down this morning after Merrill downgraded the sector. Most banks and brokers are lower. Also, there is chatter that State Street (STT) and Barclays (BCS) may be having problems of their own with commerical paper and other debt.

There was a small deal this morning, with Medco Health (MHS) agreeing to buy PolyMedica (PLMD) for $1.5 billion. Small deal, but at least they are getting done.

We will also get the FOMC minutes today from August, but since the Fed has completely changed its tune since the last meeting, I wouldn't place too much weight on the statements.

Asian markets were mixed overnight, but China hit its 7th consecutive record high. Oil is trading a bit lower, hovering near $71.75. And bond yields have broken recent support, with the 10-year yield falling further to 4.55%. I still believe this downward pressure is indicating that the Fed will cut rates in September. I would like to see them take the discount rate down another 50 bps.