By Carlos Guillen

Equity markets are making a respectable bounce during today's trading session after making a rather surprising downturn in the late half of trading yesterday. Today, investors are once again banking on the expectation that European Union officials will take market-friendly steps to resolve the Greek debt fiasco this coming Monday. Moreover rather encouraging data from here at home is also serving to prop up equities, despite some rating downgrades of major financial institutions.

News from Greece has been a bit scarce today, but the indications are on the positive side. Yesterday, after a three-hour conference call among the 17 euro zone ministers, Euro-group chairman Jean-Claude Juncker said progress had been made, as a report that provides support for the sustainability of the Greek debt had been completed, accomplishing a step required for approval of the bailout package. The next step will be taken this coming Monday when European Union officials will likely approve the bailout. However, given the unpredictable history of this saga, we are not holding our breath.

Perhaps spooking investors a bit was news that ratings agency Moody's warned that it may cut the credit ratings of 17 global and 114 European financial institutions, as it is apparent that the impact of the euro zone debt crisis is expanding around the world. Moody's said that of the 17 global institutions that face a potential credit downgrade UBS, Credit Suisse, and Morgan Stanley would have their credit rating cut by as much as three notches; Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC Holdings, and Goldman Sachs would have their credit ratings cut by two notches; and Bank of America and Nomura would have their credit ratings cut by one notch.

Here at home, employment data continues to come in rather favorably. According to the Labor Department, initial claims during the week ended February 11 totaled 348K, which decreased from the 361K revised figure reported for the prior week and landed below the Street's estimate of 365K. The four-week moving average of insured unemployment for the week ended January 28 totaled 3,493K, representing a decrease of 8.25K week to week. The down trend in the initial claims four-week moving average is strong, totaling 365K and representing the fifth consecutive week of declining level, which may lead to further declines in the unemployment rate moving forward.

Also a bit encouraging was better than expected overall Producer Price Index (PPI) data. According to the Labor Department, PPI increased by 0.1% in January after decreasing 0.1% in December, landing below the Street's estimate of a 0.3% increase. However, perhaps a bit disappointing was that eliminating the noise effects of food and energy, PPI increased by 0.4%, above the Street's estimate of 0.2%.

On the housing front, there were also positive data points indicating that the macro economy is slowly improving; more on this below.

Home Construction & Delinquencies
By David Urani

The potential for an American construction rebound remains intact as housing starts came in at an annually adjusted rate of 699k in January, up from 689k the prior month, and above the 675k consensus. The first thing to note off the bat is that the increase in starts was a result of an increase in multifamily construction (this tends to be a volatile reading). Normal single-family housing starts actually went down to 508k from 513k.

Permits for new starts were up slightly, and although it wasn't a significant gain at least single-family went up. In the meantime, completions of 530k came in well below the previous month's 602k. Completions were also the lowest since last January. It's possible homebuilders have been tentatively breaking ground on new land but are waiting for the selling season to pick up to get a feel for demand before fully developing.

Nevertheless, yesterday we noted the strong confidence reading from the NAHB, and as we said it bodes well for construction activity in the coming months. Therefore don't be surprised to see the starts figure pick up speed next month.

The Mortgage Bankers Association gave out the latest quarterly stats on mortgage delinquencies as well, and there was some more positive progress there, although not entirely surprising. The main takeaway is the ongoing decrease in the delinquency rate, to 7.58% in 4Q11 from 7.99% in 3Q11. Certainly mortgage lending has become more cautious and home buyers newly entering the market tend to have good credit, relatively speaking.

The problem is that the pipeline of troubled borrowers remains large, and foreclosure inventory continues to saturate the market. The foreclosure rate of 4.38% was down just slightly from 4.43% in the previous quarter. And, we are still just marginally below the 4.64% high of 4Q10. Fortunately the improving trend in new delinquencies suggests foreclosures should slow over the long term, it's just that it takes forever to flush out that recession inventory when the foreclosure process can take 2 years or more to complete.

Philly Fed

The Philly Fed index was up to 10.2 from 7.3 month to month in February, and slightly above the 9.5 consensus. This follows up in the higher Empire State index from yesterday. Unlike the Empire State reading which didn't look quite as strong under the hood, the Philly report showed increases in most of the major components, including new orders, shipments, and prices received. However, employment slowed to 1.1 from 11.6. Inventory also declined for a third month in a row, although that could be a positive sign that indicates a need to produce more.