Wednesday: 08/20/08 10:30 AM EDT: A strong earnings report from Hewlett-Packard is lending some support for stocks this morning. The indices began the day in the red and this provided some lift for bonds. Treasuries are currently still ahead, but they are off earlier highs.

There are no major economic releases scheduled for today but a couple of minor ones. The first brought more bad news about housing finance. The Mortgage Bankers Association of America said that its index of mortgage application activity fell last week by 1.5% despite a decline in average mortgage rates.

The purchase index edged down by 0.4% while the refinance index fell by 3.7%. Refinances accounted for 34.8% of application activity, down from 35.2% the week before and the lowest percentage since July of 2006.

Both the overall index and the refinance index were at their lowest levels since December of 2000. Though the purchase index was slightly lower three weeks earlier, last week's was the second lowest since February of 2003.

In the second minor release of the day, the Energy Information Administration said that inventories of crude oil surged last week by about 9.4 million barrels (one barrel equals forty-two gallons). On a year-over-year basis, supplies were still down by 7.1% but this was the best Y/Y margin since mid-May.

The report said that inventories of distillates, which include diesel fuel, edged up by about 500,000 barrels. The level was down by 0.1% from a year earlier.

But the report also said that inventories of gasoline fell last week by 6.2 million barrels. This was a fourth consecutive weekly decline totaling 20.5 million barrels. On a year-over-year basis, supplies were down by 1.7%, the first negative margin since last February and the largest negative margin since last November.

Prior to the release of the oil inventory report, oil futures were up, extending yesterday's gains. Stock traders will be watching to see how prices respond to the latest inventory numbers.

source: lioninc.com