Inflation data will be one of the big items to watch ahead of Wednesday's opening, after scorching hot commodities prices snuffed out a rally in stocks by the final hour Tuesday.
January's consumer price index is reported ahead of the opening bell, as are important real estate data - housing starts and building permits. Key for the markets is the release at 2 p.m. of minutes from the last FOMC meeting which will include the Fed's forecast. Traders are looking at that report to help decipher the Fed's most current thinking on interest rate direction.
Presidential primaries in Wisconsin and Hawaii Tuesday night will also leave the markets some headlines to consider, particularly in the tight Democratic race.
Stocks could get a Hewlett hop early, after the tech giant reported better than expected profits after the bell Tuesday. Hewlett-Packard said it earned $2.1 billion, a 38 percent increase. H-P said rising shipments of notebook and desktop PCs added to its sales growth. Revenues rose 13 percent to $28.5 billion. The stock jumped more than 5 percent in after hours trading.
Not so healthy in after hours trading was Crocs , down 13 percent, after it gave a 2008 outlook that disappointed investors. Crocs though reported an 84 percent increase in net income to $38.3 million for the fourth quarter. Revenue nearly doubled to $224.8 million. But Crocs also reported that inventories nearly tripled at the end of 2007, in part because of logistics problems.
Other earnings reports due on Wednesday include Garmin , Transocean and TJX .
Tuesday's session started with a bounce after Wal-mart's stronger-than-expected earnings, but fizzled as oil surged to a record high above $100 per barrel and other commodities ran higher in tandem. Oil closed at $101.01, a 4.7 percent move and its first close above the $100 mark.
Softs and metals moved higher. In the metals markets, gold climbed 2.6 percent to $926.60 per troy ounce and silver ran up 2.3 percent to $17.49 per troy ounce, a 27-year high. Copper was up 5.8 percent to $3.7250 per pound, its highest price in four months.
As commodities rose, the dollar fell. It lost 0.5 percent against the euro to its lowest close in two weeks. The dollar also lost 0.5 percent against the yen.
The Treasury market also was rocking. The 10-year fell 25/32, raising its yield to 3.875 percent, its highest yield in more than a month. The two-year was at 2.043 percent, its highest yield since Feb. 4.
Miller Tabak's Tony Crescenzi says the move in Treasurys stemmed from inflation fears. China overnight reported a 7.1 percent year over year gain in consumer prices in January, higher than expected. "These figures look worrisome when put in the context of last week's U.S. import price data, which showed that the prices of goods imported from China surged 0.8 percent in January, the most since record-keeping began in December 2003," he wrote in a note Tuesday.
Crescenzi says the move in bonds threatens the pickup in mortgage refinancing activity.
The Dow meanwhile, punked out after staging at 157-point gain, or 1.3 percent move. It reversed the run up and fell 10.99 points on the day to 12,337. The Nasdaq was off 15.60 or 0.7 percent, and the S&P 500 lost 1.21 points or 0.1 percent to 1348.78.
Oil was the biggie though, getting lots of attention from stock traders. Peter Costa of Eckhart and Co said early in the day traders were looking at Wal-mart, thinking maybe the economy is not all that bad. "But then you see guys on TV all day, saying with oil at $100 a barrel, even $95 a barrel, will it be sustainable?" he said.
Oil's runup was a result of supply concerns. It moved in part on worries that OPEC would consider cutting production, more trouble in Nigeria and a refinery explosion in Texas. OPEC next meets March 5.
M.F. Global senior vice president John Kilduff sent us a note after the close of NYMEX floor trading. Kilduff, a CNBC contributor, says oil could continue to move up in the short term.
"From a trading perspective, we are at the top of the $85-100 range. While the underlying conditions argue against a further advance, there is a return of speculative fervor and an inflation wave ripping around the world, as evidenced by the recent China data," he wrote.
"We're likely to continue higher for the time being given the latter concerns. I would not expect it to last though. My characterization that 100 represents a ceiling with a skylight still holds," he also notes.
Oil hit an all-time high of $100.10 per barrel before settling to $100.01 at the end of the NYMEX session. Gasoline rose 4.4 percent to $2.6031 per gallon. Heating oil was up 4.3 percent at $2.7614 per gallon. Natural gas was up 3.7 percent to $8.977 per million BTUs.
In addition to Fed minutes, there is some Fed speak Wednesday. St. Louis Fed President William Poole speaks at Truman State University in Kirksville, Mo. at 1:30 p.m.
Here's the data expected Wednesday. All times are Eastern time.
0830 Jan. CPI, expected +0.3 percent
0830 Jan. CPI ex food and energy, expected +0.2 percent
0830 Jan. Housing Starts, expected 1.02 million
0830 Jan. Building Permits, expected 1.04 million