Equity futures are sharply lower this morning as Bank of America reported it had lost $5.2 billion in the fourth quarter. The Republican upset in the Massachusetts election may also be causing some investor anxiety as the Democrats no longer have 60 seats in the Senate, which makes the future of healthcare reform more uncertain.

90 minutes before the bell, the benchmark S&P 500 is down 4.40 points to 1,141.30 and futures on the Dow are off 33 points to 10,637.

Weak commodities confirm that that risk is off the table. WTI Crude oil is down $1.10 to $77.92 per barrel and Spot Gold is $10.00 lower to $1,130.00.

Key Events Today:

8:30 ― Housing Starts are expected to inch up to an annual pace of 579k in December. The past two months have been volatile; in November the pace jumped 8.9% ― including a 67% sprint in multifamily units ― but had fallen 10.1% the prior month. Analysts are pointing to the extension of the government tax incentive as a reason why a positive number should be seen to close the year. 

“A swing in weather patterns, once again, will play the pivotal role in the housing starts numbers,” said economists from IHS Global Insight, noting that November was “the third-warmest and 18th-driest November in 115 years,” which means “some homes that would have been started in December were instead started in November.”

They added that building permits are a better indicator of underlying trends and should rise to a pace of 599,000.

8:30 ― The Producer Price Index is expected to be tame in December. The headline index is set to remain flat after soaring 1.8% in November due to volatile energy prices, which moved up 6.8%, as well as food costs, which gained half a percentage point. The core index, which excludes energy and food prices, is anticipated to rise 0.1% after a 0.5% uptick. Markets gives more attention to consumer prices and they were already released last week, so it’s unlikely the numbers will rock the markets.

“Although wages, a producer’s primary cost, are no longer declining, they remain low,” said analysts from BBVA. “Additionally, the cost of intermediate materials is still below that of the previous year. Low cost of inputs, coupled with weak demand, will incentivize producers to keep prices steady.”

  • Treasury Auctions:
  • 11:30 ― 4-Week Bills

Last but not least, the FHA is expected to announce today an increase in the upfront mortgage insurance premium fee from 1.75% of the loan amount to 2.25% of the loan amount. READ the original MND story. READ the WSJ story.