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|Includes:Caterpillar Inc. (CAT)

By Carlos Guillen

Equity markets attempted this morning to recover some of the massive losses from the prior week but, unfortunately, are headed south once again. Better than expected results from Caterpillar Inc. (NYSE:CAT) served to enthuse investors early in the session, but that was short lived, as worse than expected housing data did not serve to give markets the support they so desperately needed today.

Before the opening bell, there were strong signs of a bounce in stocks as upbeat results from Caterpillar lifted Dow futures. The company delivered fourth quarter earnings per share of $1.54, which were $0.26 above the Street's consensus estimate. And while revenues of $14.4 billion did decline on a year-over-year basis, they were still better than the Street's consensus calling for $13.6 billion. More encouraging, however, was the guidance for the full year; the company said it sees earnings per share of $5.85, above the Street's consensus $5.80, and revenues are forecasted to be in the range of $53.2-58.8 billion, which have a midpoint of $56.0 billion, higher than the Street's expectation of $55.18 billion. As we know, Caterpillar is viewed by many as an economic bellwether for global activity, so these better than expected forecasts served to offset some of the malaise from the prior week.

But around 10 a.m. investors got a glimpse at housing data, which was not very inspiring to put it mildly. As it stands, sales of new single-family homes fell in December by 7 percent mostly as a result of harsh winter weather. On a positive note, however, a bird's eye view of 2013 in its entirety showed that new home sales reached its highest sales level in five years; more on this below.

Making things worse for equities today was resurging chatter about emerging market weakness, particularly from Latin America. Later this week, investors will be focusing on the Fed as it is scheduled to meet and give its target rate directive. As we recall, investors had been spooked by Fed tapering actions, and expectations at the moment are for another round of tapering to the tune $10 billion, bringing asset purchases down to $65 billion per month.

After the close of today's session, Apple will report financial results for its most recently completed quarter, and given its massive market cap, it is sure to shake markets tomorrow, let's sit tight as it is likely to continue being a rough trading week.

New Home Sales Freeze Up
By David Urani

The Census Bureau reported its December new home sales result and it came in at an annual rate of 414k for the month, well below the 450k consensus and the revised 445k (revised down from 464k) November result. That's a 7% month to month decline, and the second drop in succession. Decreases in the Northeast, South and West offset a gain in the Midwest. Inventory also came down, by 3% for the month and is down 5.5% since September.

That said, I don't want to sugar coat it too much but the new home sales report tends to be a volatile data set to begin with, especially during the winter months when seasonal adjustments can skew the results. That goes double this year, which of course has been unusually cold, and cycles over an unusually warm 2012. Take for instance the Northeast, which showed a 36% month to month decline; the result was surely impacted by the freezing conditions in the region, exacerbated by seasonal adjustments.

In the end the result was weak, and there's not much to be taken positively from it, even if it's a little dubious due to the weather. Likewise, homebuilder stocks held up initially but have turned decisively south. The Dow Jones US Home Construction Index, which tracks related stocks, is down more than 1% on the day.

The data is worth being cautious over, but I'd like to see a couple more months (note: January has also been quite cold) to get a trend, especially as it warms up into the spring selling season.

Stocks: CAT