The story this morning is the huge sell-off in the global equity markets, and the outlook for a serious decline in the US stock market this morning. At 8:20 the DJIA index traded at -163; the 1`0 yr note +28/32 and mortgage prices +14/32. All global stock markets were hit overnight, the long awaited correction in equity markets has arrived; last week the DJIA had its first weekly decline in a month. As we have noted many times the stock market has gotten way out in front of reality and a correction is likely; not only our view, but the view of most market analysts.

The only data today hit at 8:30; the NY Empire State manufacturing data. The data was a lot better than expectations and did provide an initial bounce in stock index trading and took the 10 yr and mortgages off their lows at 8:00. The overall index at +12.08 from -0.55 in July was five times stronger than estimates; new orders at 13.43 frm 5.89, prices pd at 13.83 frm 10.42, and employment at -7.45 frm -20.83. Any read under zero is contraction. Mortgages will be supported today as long as the stock market is falling.