We will read the minutes from the July meeting with an eye toward any clues on the likelihood of near-term tapering and potential changes to the forward guidance. On the first point, within the discussion of the appropriate stance of balance sheet policy in the June minutes, "many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases." An adjustment to this language along the lines of many or most members expecting that it would soon be appropriate to reduce the pace of asset purchases would be a strong signal of near-term tapering, in our view. In terms of dovish risks, particularly extensive discussion of the risk posed by higher mortgage rates (or tighter financial conditions in general) or lower-than-target inflation could be red flags that the Fed was thinking twice about near-term tapering. ...Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index. Refinance activity has fallen sharply over the last few months, but purchase activity is still up about 7% year-over-year.
• At 10:00 AM, Existing Home Sales for July from the National Association of Realtors (NAR). The consensus is for sales of 5.13 million on seasonally adjusted annual rate (SAAR) basis. Sales in June were at a 5.08 million SAAR. Economist Tom Lawler is estimating the NAR will report a July sales rate of 5.33 million.
• During the day, the AIA's Architecture Billings Index for July (a leading indicator for commercial real estate).
• At 2:00 PM, the FOMC Minutes for Meeting of July 30-31, 2013.
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