Every morning is a whole new world in the markets this week. Today the themes are mixed price action in  Treasuries and a continued sell-off in equities.

The Treasury curve steepened overnight with the two-year yield holding steady at 0.176%, the 10-year yield moving down 2.5 basis points to 2.149%, while the 30-year yield is four basis points higher at 3.537%. The Fannie Mae 4.0 MBS coupon is flat at 104-19.

The more eye-popping figures are in equities: S&P 500 futures are 14.75 points lower (-1.31%) at 1,109.00, and Dow futures are 102 points off (-0.95%) at 10,631. Despite the appearance of a strong rebound Tuesday, the S&P 500 has shed an astonishing 134.5 points since Thursday, a drop of 10.73%.

Global equities were mostly in the red. One exception was in China, where stocks rose 1.27%, but shares fell 0.63% in Japan and 0.95% in Hong Kong. The ongoing session in Europe is more severe: France's CAC-40 is 2.53% lower (despite affirmations from S&P and Moody's that the country remains AAA), and the FTSE 100 is down 0.48%.

Meantime, light crude oil dropped 1.07% overnight to $81.99 per barrel, while gold prices rose 0.54% to $1,794.10

Key Events Today:

8:30 - The monthly Trade Balance is anticipated at $48 billion in June, slightly narrower than the $50.2 billion reported for May but still quite a bit larger than the $43.6 billion reported for April. The value of imports is anticipated to slow due to falling prices, while exports should stay roughly stable.

"We expect a reversal of most of the previous month's deterioration in the trade deficit in June," said economists at Citigroup. "Petroleum imports probably fell sharply as both price and volume declined at a time when seasonal factors were looking for an increase. While customs duties indicate a rise away from oil, the net effect on is a decline in imports. Exports probably rebounded modestly, led by aircraft."

A weakened dollar and expanding exports in the service sector should narrow the monthly deficit, according to forecasters at BBVA.

"Import prices were down slightly in June and likely deflated the value of imports, while a slower-than-expected recovery of the U.S. economy may have reduced demand for other imported goods," they said. "Auto imports have been declining as a result of the Japanese earthquake disruptions, however supply chains are expected to recover in the coming months. Thus, we expect only limited improvements in the overall trade balance."

8:30 - With the four-week average at 407,750 - the lowest since the mid-April - the Initial Jobless Claims report has been providing a semblance of hope that the third-quarter growth is better than what other reports are suggesting. The last report, called "clean" by the Dept. of Labor, showed 400k new claims, the lowest figure since early April (the prior week's 398k was revised upward). 

How will the first week of August hold up? Views are mixed. The median estimate is 403k, which would mark the fourth week that claims hold near the 400k mark. But predictions range from 390k to 420k. 

"There is a risk that claims were substantially higher amid a partial shutdown of the Federal Aviation Administration," said economists at Citigroup, who predict 400k claims. "Roughly 4,000 employees and 70,000 construction workers laboring on assorted FAA projects were sidelined between July 23 and August 5. As the end of the furlough was marked with the passage of a congressional funding bill, affected workers probably filed for unemployment benefits ahead of the deal."

Treasury Auctions:

11:30 - 30-Year Bonds ($16 billion)