1. The yield on the 10-yr note flirted with 2.90% yesterday and that was enough to keep the selling pressure on stocks, which broke down in late trading to end at their lows for the day.

2. The other item that made waves on a slow news day yesterday was the weakness in emerging markets, which have not acted well since the idea of a Fed tapering in the near term started to gain prominence in mid-May.  Indonesia was the poster child for the troubled emerging markets on Monday as its main index dropped 5.6%.

3. Things didn't get any better overnight either for the emerging markets.  The Jakarta Composite fell another 3.2% while Thailand's SET Index declined 2.0%.  That weakness spilled over to regional markets and, along with the weak showing on Wall Street, set a negative tone for European markets.

4. Japan's Nikkei was off 2.6% on Tuesday; Hong Kong's Hang Seng lost 2.2%; South Korea's Kospi slid 1.6%; and China's Shanghai Composite dropped 0.6%.  Major markets in Europe, meanwhile, are down close to 1.0%, yet Spain's IBEX Index is an outlier with a decline of 2.3%.

5. The struggles of the emerging markets have reportedly led to a flight-to-safety trade in the Treasury market that has helped boost the intermediate to long end of the Treasury curve.  The benchmark 10-yr note is up 13 ticks, lowering its yield to 2.83%.

6. The direction of long-term rates -- if not the level itself, which appeared problematic for equities the last two sessions -- has provided a measure of support for the US stock market, along with a fairly warm reception to a batch of earnings results out of the retail sector.

7. Dow component Home Depot (HD) led the pack in the latter regard, topping the S&P Capital IQ consensus EPS estimate by three cents, on a strong 10.7% increase in second quarter comparable sales, and raising its FY14 guidance.  Shares of HD are indicated 2.9% higher in pre-market action.

8. Overall, though, buyers are still showing some reserve.  The S&P futures are up less than two points and are only trading 0.2% above fair value.  The tumult in the emerging markets is a distraction as is the continued uncertainty about the path the Fed will take at its September FOMC meeting.

9. With 15 minutes to go before the start of today's cash session, equity futures continue to hover near their highs. Although index futures trade with slim gains, this was not the case overnight as global markets continued their recent bout of weakness. Notably, Indonesia's Jakarta Composite lost 3.2% as the country's currency, the rupiah, slumped to a 51-month low versus the dollar.

10. Domestically, investors are focusing on retail earnings. Best Buy (BBY 33.93, +3.20), Home Depot (HD 78.05, +2.84), TJX Companies (TJX 52.60, +1.85), and Urban Outfitters (URBN 43.60, +3.68) are all up between 3.6% and 10.0% after beating on earnings and revenue. Meanwhile, J.C. Penney (JCP 14.00, +0.78) holds a pre-market gain of 5.8% despite reporting a bottom-line miss on below-consensus revenue. On the downside, Dick's Sporting Goods (DKS 47.82, -2.83) is lower by 5.6% after missing on earnings and revenue.

11. After registering four consecutive losses, the S&P 500 began today's session with a modest gain. However, the index was quick to trim the opening advance in half. The discretionary sector (+0.4%) is an early outperformer with retailers displaying strength after Best Buy (BBY 33.84, +3.11), Home Depot (HD 75.01, -0.20), TJX Companies(TJX 53.37, +2.62), and Urban Outfitters (URBN 43.57, +3.65) all reported better-than-expected earnings. 

In addition, home builders have also shown some early strength as the iShares Dow Jones US

Home Construction ETF (ITB 20.83, +0.13) trades higher by 0.6%. 

12. Meanwhile, the Dow trails behind the S&P as some of its top components lag. IBM (IBM 183.41, -0.82), United Technologies (UTX 102.28, -0.35), and 3M (MMM 115.47, -0.14) are all down between 0.1% and 0.4% with the top-weighted member, IBM, trading at its lowest level in 13 months.

BLOOMBERG

13. U.S. stocks fluctuated, after a four-day drop for the Standard & Poor’s 500 Index, as investors weighed retailers’ results and awaited signals on stimulus measures from the Federal Reserve.

14. Best Buy Co. rallied 10 percent after posting quarterly sales that exceeded projections. J.C. Penney Co. added 4.4 percent amid signs the company’s sales slide is slowing.

15. All eyes will be on the commentary from the FOMC minutes for some sort of guidance on QE tapering,” Nick Skiming, who helps manage about $10 billion at Ashburton Investments, said by telephone from the Channel Island of Jersey. “The commentary from Fed officials hasn’t been backed up by action yet. Once we actually see evidence and actual movement, that would provide a clearer indication of what will happen with markets.

16. The central bank will publish the minutes from the Federal Open Market Committee’s July 30-31 meeting tomorrow.

17. Fed policy makers have been weighing economic data to determine the timing and pace of any reduction in stimulus. A report tomorrow will show sales of existing homes rose in July and data Aug. 22 will indicate initial jobless claims increased last week.

18. Data today showed U.S. same-store sales rose 0.2 percent month over month in the Aug. 17 week. Sales at stores open at least a year rose 3.4 percent compared to a year earlier, according to the latest data released by Johnson Redbook Research.

19. Investors have also been weighing corporate earnings for signs of strength in the economy. Of the 466 companies in theS&P 500 (SPX) that have reported results this period, 72 percent have posted earnings that surpassed estimates.

20. Stocks fell in Europe and Asia and oil led declines in commodities on speculation the Federal Reserve will curb bond purchases next month. U.S. equities were little changed and Treasuries advanced.

21. “The U.S. is going to unwind a historical amount of stimulus and it’s going to make markets nervous,” said Nader Naeimi, the head of dynamic asset allocation at AMP Capital Investors Ltd. in Sydney, which manages more than $130 billion. “In the next couple of months, until U.S. bond yields settle down, we’re going to see some choppy trades” in global equities, he said.

22. The U.S. 10-year yield fell five basis points, or 0.05 percentage point, to 2.84 percent, according to Bloomberg Bond Trader prices. The yield climbed to 2.90 percent yesterday, the highest level since July 2011.

23. The yen strengthened for the first time in three days against the dollar on increased demand for the relative safety of the Japanese currency. The yen appreciated 0.3 percent to 97.29 per dollar. The euro added 0.7 percent to $1.3423.

24. Gold gained for the fourth time in five sessions as a weaker dollar increased demand for the precious metal as an alternative investment.

Ganan 25. The Bloomberg Dollar Index, a gauge against 10 major currencies, fell as much as 0.4 percent,

declining for the first time in three sessions. The greeback’s rally this year, up 3.7 percent through yesterday, contributed to a 19 percent drop in gold. The Federal Reserve’s Federal Open Market Committee meeting minutes are due tomorrow, when investors will look for clues on when it will reduce stimulus.

26. West Texas Intermediate crude fell for a second day amid speculation that the Federal Reservewill reduce stimulus measures next month, curbing investors’ appetite for commodities.

27. The euro and franc strengthened as a slide in stocks around the world fueled demand for the relative safety of the currencies versus emerging-market counterparts.

28. “The weakness in some of the emerging-Asian currencies and modest strength in the yen would be consistent with a major risk aversion,” Robert Sinche, global strategist at Pierpont Securities Holdings LLC in Stamford, Connecticut, said in a telephone interview. As for the euro, “you have European investors who are pulling money back from emerging-market exposure. Apparently there was a lot of that.”

29. The greenback declined after the Federal Reserve Bank of Chicago’s national activity index for July was minus 0.15 from a revised minus 0.23 in June. A Bloomberg survey forecast a reading of minus 0.10. A number below zero indicates below-trend growth in the national economy.

30. Commodities are mixed today with gold and natural gas near session highs, silver back into positive territory, copper flat and crude oil near its session low, below $106/barrel.