Durables were up somewhat stronger than expected, but given where they were coming from, its not much solace. Ex-transportation (which is important because transportation durables have a "spurtish" nature to them, plus they tend to be so big - think the price of an aircraft) they were up modestly.

New home sales out at 10:00. This one will definitely set the tone, even though its a number with a lot of noise in it. As such I'm not expecting much unless there's a big surprise in there, and I don't expect it this time around - next month is going to be the monster, as the Gorilla called "Subprime" will have stomped all the China in next month's number (it started in March, so you need at least 30 days for the full effect, because you write a contract on a real estate and then it takes a month - or two - before it closes.)

The other big story this morning is on Lehman's Subprime Bonds. The big news here, of course, is that now the credit markets are starting to take the hits from the stupidity in the lending market. Of course we all knew there would be a delay, but that the detonations would take place. The question now becomes "who chased those outside returns with the big coupons?" I suspect we're soon to find out, and if any Pension Funds bought the lower (but not junk-rated) bonds, such as the BBB tranches, I suspect we're going to start seeing some real screaming when the defaults start and Moody's and others are forced to start issuing downgrades.

In the end, this story is going to play out because of the old-time problem in the financial markets - greed. Pension funds and others have gotten themselves in over their heads by over-promising, just like our government has with Medicare and Social Security. And while the blowup in those two programs (which I've blogged about repeatedly over at Musings) is not due to explode for 20 or so years, this one is happening in the here and now.

Futures are up modestly on mixed earnings - we're obviously going to take another run at DOW 13,000 this morning - whether we get there is going to be, I suspect, largely about the New Home Sales number out at 10:00. It wouldn't surprise me at all if the "headline chasing" herd is out again this morning, and that sort of fairly violent reaction ensues - no matter which way the number comes in.

One final thing to think about - would you ever expect a broker or "street analyst" to tell you "Now is a horrible time to be in equities - go to CASH!"?

Think about this one guys and gals - isn't this sort of like asking a car dealer if its a good or bad time to buy a car? Or, more to the point these days, asking a Real Estate trade group - or individual Realtor - whether or not its a good time to buy a house?

Would you ever expect any of these guys - all of whom are "in the biz" - to tell you that their product, at the present time, sucks?

Just a point to ponder.....

New Home Sales (10:00 update) - Up 2.6% above revised February numbers (which were revised down; gee, that makes the numbers look better than they were doesn't it?), and is WAY inside the error band (+/- 12.9%) but the important number is that its 23.5% below the 2006 March estimate (and that's wildly outside the error band of +/- 7.9%))

Supply is now listed as 7.8 months, which is well above a "normal" supply of 6 months.

This is not a strong number..... but again, it doesn't include the "mortgage mess" - at all - because it takes at least 30 days for a sale to close, not to mention that for other-than-specs the leadtime is much longer - six to twelve months.

That fun will come with the next monthly release, in May.