Soggy Housing Data Only Adds To Pre-Fed Stress

Wall Street is struggling for repeat green this St. Patrick's Day even after robust gains lit up the screens in a light-volume rally.

A disappointing housing report helps set the cautious tone as the Federal Reserve begins its two-day meeting, although bulls may argue that any data miss at this point simply slows down the Fed.

Nerves are apparent. Monday's 2.4 percent drop in the CBOE Volatility Index (VIX) (figure 1) was pretty thin considering a robust gain across the stock averages. That included a 1.4 percent rise for the S&P 500 (SPX) that delivered the broad measure back above 2080 and followed a third straight weekly loss on Friday.

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What's more, the bond market held in there yesterday despite the strong move for stocks, keeping the 10-year yield near 2 percent.

In other words, keep an eye on VIX and bonds over coming days.

FIGURE 1: SMALL MOVE FOR VIX. The CBOE Volatility Index (VIX) nosed higher during Monday's stock advance but its small move may reflect continued caution among traders in a week that includes a pivotal Federal Reserve meeting and more. Data source: CBOE. Chart source: TD Ameritrade thinkorswim. For illustrative purposes only. Past performance does not guarantee future results.

Fed Timing Up for Debate. The highly anticipated Fed meeting will conclude Wednesday with a policy statement to follow plus commentary straight from the chief as Janet Yellen holds a post-meeting press conference.

A round of softer-than-expected data leaves some market participants wondering whether the Fed will drop its "patience" disclaimer, an edit that many would have put money on a month ago but isn't a lock by any means.

Some observers do think Yellen will be careful to assure markets that the Fed will be clearer with its timeline.

Weather-Impacted Housing Report. Construction on new U.S. homes slumped 17 percent in February, mostly because heavy snow slowed work in the Northeast and Midwest. Housing starts sank to an annual rate of 897,000 in February from a revised 1.08 million in January, well below most Street estimates.

But not all of this morning’s report details were so negative. Nationwide permits for future construction rose to the second highest level since the end of the latest recession. Permits rose to an annual rate of 1.09 million from January's upwardly revised level of 1.06 million.

Could that mean long hours on building sites once spring arrives?

Oracle for Tech Strength? Software giant and potential tech beacon Oracle Corporation ORCL graces an otherwise thin earnings line-up today with its post-close fiscal Q3 results. Analysts generally expect the company’s cloud business to remain a bright spot, while it could warn about the drag of a strong dollar.

The Street expects EPS of $0.68 on revenue of $9.47 billion. Guidance could be a potential mover. For Q4, consensus EPS sits at $0.94 on revenue of $11.44 billion.

For the full 2015 fiscal year, consensus was for EPS of $2.95 on revenue of $39.09 billion. Fiscal 2016 consensus was for EPS of $3.17 on revenue of $40.40 billion.

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