Yesterday it was reported that Existing Home Sales slipped 0.4% in January, and that the inventory of homes for sale edged higher, reflecting a growing imbalance between housing supply and demand. Good for buyers, not for sellers: sales of existing homes are now down 32% from the peak in autumn 2005 (New Home sales are -55% from the peak).

This morning the Producer Price Index jumped 1.0% in January on rising energy costs and posted the biggest 12-month gain in more than 26 years. Core PPI, which strips out volatile energy and food costs, was +0.4 percent, the sharpest increase since February. They were expected +.4% and +.2% respectively, so worries about inflation seem to be real - producer prices were up 7.4 percent from January of last year, the steepest climb since October 1981! Later this morning we'll see Consumer Confidence, Fed Governor Kohn speaking in New York , and the markets preparing for a $24 billion 2-yr auction tomorrow and a $14 billion 5-yr auction Thursday.

Mortgage prices were roughly unchanged before these numbers, and are currently...about the same! This is surprising, although there is some feeling that a) the market is "over-done" on the side of higher rates, and b) the continued housing weakness is bound to have more impact on the economy as time goes on (not good!). Yesterday the markets got some good news when S&P did not downgrade bond insurers MBIA or Ambac. If they had been downgraded, they would have had trouble guaranteeing debt and strip the AAA label from $1.2 trillion of insured municipal and asset-backed debt.