This oil report could be what matters for markets Wednesday

Oil inventory data could be an important factor for all markets Wednesday as traders await the 10:30 a.m. EDT government release to see if inventories built as much as another report suggested.

API late Tuesday showed a surprise build of 4.5 million in crude inventories when the market expected a draw. That helped reverse some of the gains made during Tuesday's session on reports that Iran would join OPEC talks in Algiers next month.

If oil makes a strong move after the report from the Energy Information Administration it could have follow on impact on equities. West Texas Intermediate crude futures were down 2 percent at about $47.13 per barrel in early Wednesday trading.

After Tuesday's surprise pop in new home sales, existing home sales Wednesday should be a focus, as traders countdown to Friday's speech by Fed Chair Janet Yellen .

At the same time, the stock market is flirting with new all-time highs. The Nasdaq hit a new intraday high Tuesday, but closed beneath it at 5,260.08, and S&P 500 (INDEX: .SPX) traded just below its all-time high. The S&P 500 ended the day at 2,186, up 4 points. Stock futures were slightly higher Wednesday.

New home sales Tuesday jumped 12.4 percent to 654,000. Goldman Sachs economists said they increased tracking GDP for the third quarter by one-tenth to 2.5 percent because of the strength in home sales, now back to 2007 levels.

"This latest data on the housing sector should give Fed officials the confidence they need to hike rates later on this year. The economy is doing better than they thought with no sign that the slowdown in world growth is having an impact here in the U.S.," wrote MUFG chief financial economist Chris Rupkey, after the new home sales release.

In an interview, Rupkey later said, "Both series [of housing data] are fairly strong in terms of the recovery's moving along from the Great Recession. It's just back to the old levels it was at before. The two series never match up. There's no guarantee existing home sales are going to pop in the same way. They are already back in the zone anyway. You could say consumers are confident. They're turning over homes," he said. Existing home sales are expected at 5.5 million when reported at 10 a.m. EDT.

There is also FHFA home price data at 9 a.m. and Markit manufacturing PMI flash data at 9:45 a.m. The government holds a $34 billion note auction at 1 p.m.

"New home sales are still about 8 percent below the 25-year average, so everything has to be put into perspective," said Peter Boockvar, chief market analyst at The Lindsey Group.

"[Wednesday's] number is somewhat old news in that it's measuring contracts that were signed months ago. New home sales is more timely. I put more stake into [Tuesday's] number," he said.

Boockvar said he doesn't believe the data would sway the Fed. Traders are watching Yellen to see if she repeats the same hawkish comments that markets heard from New York Fed President William Dudley last week and Fed Vice Chair Stanley Fischer over the weekend. Dudley said the Fed could hike rates as soon as September, and Fischer said the Fed is close to meeting its objectives.

Rupkey said minutes from the Fed's discount rate meetings showed that now eight of 12 regional Federal Reserve banks are asking the Fed to move on policy, by raising the emergency loan rate for commercial banks. "It's a message," said Rupkey.

"Still, the most powerful person on the Fed is Yellen. She's turned them back before," said Rupkey. "I'm hoping that she's going to signal that September is a live meeting, a little more alive."

Michael Feroli, chief U.S. economist at JPMorgan, described the discount rate requests as a "soft dissent."

"For the record, last year there were eight requests at the September meeting, nine in October and 10 in December. Even after today's news, we feel comfortable thinking a September hike remains a long shot. But the discount rate requests also signal that endless delay could strain the cohesiveness of the Committee," he wrote in a note.

As for stocks, the market Tuesday drifted once more on light volume. U.S. composite volume was 5.6 billion shares, one of the 10 lightest days of the year.

"There's not a lot of power because there's not a lot of players. Who's going to make a big bet there ahead of Jackson Hole?" said Scott Redler, chief strategist at T3Live. Yellen speaks at the Fed's symposium in Jackson Hole Friday morning.

"People don't believe she's going to be hawkish. People are saying she's not going to be hawkish with the rest of the Fed speakers, but if she actually is somewhat hawkish, some guys are thinking the market is going to have a tantrum and cause a sell-off that they can buy," said Redler.

Redler said there's still a lot of doubters about the market rally. "I would say it's still kind of funny that everyone is trying to find a reason to call game over for the market when all we're doing is grinding higher all summer," he said.

He said he is watching the 21-day moving average on the S&P 500. "In order for the market to have a healthy pull in, you have to have the market break the 21-day, and right now the 21-day moving average is somewhere around 2,170-ish. Active traders will be looking for opportunities, when it seems that the cool thing to do is call a top," he said.

As for the bond market, the auction of two-year notes went smoothly Tuesday. Boockvar pointed out that the yield of 0.76 percent was about 1 basis point under the when-issued, and direct and indirect buyers took a combined 71 percent, versus the previous 12-month average of 61 percent.

"I think the bond market itself just speaks to what [investors] think, even if Yellen leaves open the possibility for a rate hike, like Dudley and Fischer did, they wouldn't follow through. If they thought it was a possible rate hike for September, [Fed funds futures] would not show odds of 26 percent. They would be at 50 percent," he said.

Besides data Wednesday, there are earnings from HP (NYSE: HPQ), Royal Bank of Canada (Grey Market: RBKDF), Guess, Express, WPP Group, Heico, Williams-Sonoma, and Workday.