Investors will closely watch tomorrow's existing home sales data release since it accounts for a larger share of the market than new homes. It is one of the most important indicators of housing market trends.
Consensus is for home resales to decline 1.1 percent to 4.57 million annualized in May, after climbing 3.4 percent to 4.62 million annualized the previous-month.
But Ajit Agrawal and Spencer Hill of Morgan Stanley's US Economics AlphaWise Macro Team expect existing home sales to beat expectations and rise 2 percent month-over-month to 4.71 million.
"Our primary data sources – which include closed home sales information from brokers and multiple-listing services – suggest solid growth in May Existing Homes Sales," they write.
And what does this mean for markets?
"We recommend going long S&P 500 and short US Treasuries going into the release," they argue. ""Our tick data analysis (5-year history) suggests a 29-bp average price reaction for the S&P 500 and an 8-bp average price reaction in 10-year US Treasuries to beats / misses of Existing Homes Sales."
We'll know how this call turns out in the morning.Don't Miss: The 3 Most Important Factors Driving Home Prices >
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