Action Economics: The markets will remain preoccupied debating tomorrow's FOMC decision, especially as today's calendar is light with only pending home sales and the Treasury's announcement of 10-year notes (reopening). Although there are many possible outcomes from the Fed, we believe the best guess is for a moderate 25 bp easing in the funds target, and a more aggressive 50 bp reduction in the Discount rate.
As for today's data, we look for a little rebound in the pending home sales index to 86.0 in October from 85.7. The debt managers are likely to announce a $8 bln 10-year note reopening, down from the $13 bln at November's refunding. Data later in the week includes PPI, CPI, retail sales, and industrial production. All are important, but will play second fiddle to the Fed's decision.