U.S. Treasury Secretary Henry Paulson said he is pleased Freddie Mac and Fannie Mae are committed to raising more capital this spring, calling reform of the government-sponsored enterprises the best way to combat foreclosures.

Richmond Fed President Jeffrey Lacker (non-voter) said economic growth should pick up next year and that withdrawing the fiscal stimulus as growth risks fade makes "eminent sense".

Speaking at the National Economics Club of Washington, D.C., Lacker said the inflation outlook has "deteriorated", but that the Fed should still remain vigilant and try to limit a rise in inflation expectations.

Inflation has become the number one concern among small business owners, according to the National Federation of Independent Business Index of Small Business Optimism released on Tuesday.

The 4.7% decline in U.S. pending home sales in May shows that the previous month's gain was not a true sign of stabilization, economists said after a release the National Association of Realtors on Tuesday.

Patrick Newport, U.S. economist at Global Insight, called the report "disappointing," noting that a lot of forces such as tight credit and rising interest rates in May were at work to bring down each of the four regions' sales. He said previous data suggested signs of stabilization, but this release indicates the housing market has yet to hit a bottom.

Shares of Freddie Mac and Fannie Mae were looking a little better in early trading on Tuesday after investors fled the two government sponsored entities (GSEs) the previous day over doubts that their underlying capital could make it more difficult for them to buy or guarantee mortgages. That, in turn, could make interest rates on new home mortgage loans rise sharply.

The concerns arose after Lehman Brothers reported that new accounting rules might require that the two companies raise billions in new funds.

U.S. pending home sales resumed their decline in May, falling 4.7% in the month after an upwardly revised 7.1% bounce in April, according to the National Association of Realtors. April's rebound was originally reported as a 6.3% gain.

The consensus was expecting the PHSI to fall by 2.5% in the month, with estimates ranging from -6.0% to +0.2%.

U.S. wholesale inventories rose 0.8% month-over-month in May, marginally above expectations for a 0.7% advance, while the previous month's figure was revised to a 1.4% gain from a previously reported 1.3% rise, according to a report released Friday by the Department of Commerce.

Federal Reserve Chairman en Bernanke said the Federal Reserve may extend Wall Street's access to lending until 2009.

Speaking at the FDIC's forum on mortgage lending in Arlington, Virginia, Bernanke did not speak on economic outlook or monetary policy, but he did say Congress may have to heighten its oversight of investment banks. He also said he endorses a proposal for a dealer liquidation process.

IndyMac has announced that, effective yesterday, it is closing both its wholesale and retail production channel and will no longer accept any new mortgage loan submission or rate locks. It will also reduce its workforce to around 3,200 from the current level of 7,400. The bank will also, apparently, continue its other retail banking operations.

The stock had reached $.71 cents Monday after trading as high as 31.32 in the last year and was delisted from NASDAQ.

High-profile speakers will take centre stage on Tuesday. Federal Reserve Chairman Ben Bernanke is set to speak in Arlington, Virginia at the Federal Deposit Insurance Corporation's Mortgage Lending for Low- and Moderate Income Households forum. Richmond Fed President Jeffrey Lacker is also slated to speak to the National Economists Club in Washington, D.C. on the U.S. economic outlook.

In terms of data, U.S. pending home sales for May are expected to show a 2.5% decrease, down from a previous 6.3% increase.