Market Overview

What to Watch For Tomorrow

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There is a lot of data highlighting the overnight session into tomorrow and also during Wednesday's session. Tonight, at 7:15 pm, we get Japanese Manufacturing PMI. This is an important number because Japan has a large manufacturing base and it is interesting to see how Japan is recovering since the earthquake and tsunami that struck last year. Also, the Bank of Japan Governor Shirakawa is set to speak during the overnight session, which currency traders will be looking for as an indication to Yen intervention (NYSE: FXY) and thus dollar (NYSE: UUP) strength.

At 5:10 am tomorrow, the fun really picks up, as Italy is set to auction 5- and 10-year bonds. The previous yields on issuance of these maturity were 4.86% and 5.66% respectively, and an uptick in yields will be taken as a signal that contagion is continuing to spread beyond Greece and Spain. A bad Italian auction would signal an extreme risk-off environment, sending risk assets globally south. At 10:00 am, we get pending home sales for the US and at 11:30 European Central Bank President Draghi is set to speak. I can assure you that market watchers will be listening to every word and movement he makes, as traders and investors will be curious to see if the ECB is closer to further action, as per the debt crisis.

Investors will also be watching the 4- and 52-week bill auctions in the US, but these are generally non-events. The last major data points of the day are the API weekly crude and gasoline stocks, which come just after the close. Energy traders (NYSE: XLE) will be watching to see where inventories are and what the impact on prices will be. Consensus is looking for a .47M bbl rise in crude inventories and a drop of .14M bbl in gasoline inventories.

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