Following yesterday’s dismal session, the major equity indices have reversed to the upside after trading to the downside earlier in the morning. The Dow Jones Industrial Average in particular is being led higher by Goldman Sachs (GS), Johnson & Johnson (JNJ), and Visa (V). Technology-sector names continue to fluctuate following Apple’s (AAPL) product show yesterday and Alibaba (BABA) announced that it has received enough orders to cover its IPO in the share price range of $60 to $66 per share. Global markets were mixed overnight, and so the US markets are looking for their own catalyst to the upside. In the meantime, the two major economic releases today provided very mixed signals for the economy, as well as investor sentiment.

Early this morning, the Mortgage Bankers’ Association (MBA) released its weekly mortgage applications report for the week ended September 5^th, and unfortunately, it was not great news as activity slid to its lowest level of banking activity since December 2000. The overall composite fell 7.2% after rising 0.2% the prior week. The purchasing index decreased 3% following a 2% decrease the prior week, and the refinancing component fell a whopping 11% after rising 1.0%. The year-over-year rate for the purchase index is at a negative 12%. Also, the average 30-year mortgage rate for conforming loans increased 2 basis points to 4.27%. Distortions due to Labor Day may be at play in the big weekly declines, but trends in this report were already pointing down, so this is even a bigger disappointment. This index is a leading indicator for single-family home sales and housing construction, so any setback could mean further interest rate delays at the Fed resulting in slow-dragging growth for the rest of America.

Next, we received a reading of wholesale trade among the sales and inventories held by merchant wholesalers for the month of July. Inventory growth in the wholesale sector proved much lower than expected, at 0.1% compared to economists’ forecast for +0.5%. However, this is actually good news given a very strong 0.7% increase in wholesale sales which pulled down the stock-to-sales ratio one notch to a very lean 1.16 from 1.17 in June. Low inventories are indicative of a need for restocking while strong sales point to strong demand from the retail sector – as noted in the ICSC-Goldman and Redbook reports yesterday. Wholesale inventories of farm products and computer equipment declined drastically in July, as did inventories of petroleum (oil) products. Inventories were building in apparel and drugs as well as autos where manufacturing output has been increasing to keep up with demand. We note that today’s report ought to lower the outlook for the business inventories report which is set to be released on Friday. Economists are presently looking for a 0.4% build in inventories. Lower contributions from inventories could lower GDP forecasts for the third quarter but, given the need for rebuilding, this should be viewed as a positive for production and employment.