Market commentary

The ADP employment report for August projects private payroll growth of 91,000, slightly below economists’ expectations of 100,000, and higher than the Labor Department’s projected total nonfarm payroll number at around 60,000, assuming 30,000 loss of government jobs. Recall this report will be released early Friday morning.

Mortgage applications fell 9.6% for the week ending August 26 as refinance applications fell 12.2%. The spike in refinance applications looks to be leveling off after mortgage rates bottomed out.

The Institute for Supply Management—Chicago reported is business barometer fell to 56.5 in August from 58.8 in July. This region’s activity appears to be stronger than most have reported, however, the national index, which will be released Thursday morning, is expected to reflect a decline in manufacturing.

Market reaction to the data has been somewhat muted with bond prices recovering early losses to be flat on the day, and stocks are trending higher. Mortgage pricing is worse by .125%.

Market commentary

Bond prices tumbled Monday as stocks rallied sharply on positive economic data. As is often the case, the reverse is true today. The Conference Board’s Consumer Confidence Index for August fell dramatically to 44.5 from 59.2. This is the lowest reading since April 2009.

The CaseShiller Home Price Index for June shows that home prices fell 0.06% month over month. For keeping score purposes, twelve of the past thirteen months have shown drops in prices, and year over year, prices have fallen 4.52%. If we take something out of this report other than that home prices continue to be weak, it is that the 2011 data is weaker than the 2009 and 2010 data during the peak summer months. There is certainly a sense that the bounces in housing were catalyzed by government intervention into the markets and without that support the market is struggling to find a foundation.

Later today, the FOMC will release the minutes from the August meeting.

As mentioned above, the markets have reversed as a result of this morning’s economic data, with bond prices higher and stocks trading lower. Mortgage prices have improved by approximately .375%.

Market commentary

U.S. markets opened as usual this morning after hurricane Irene passed over New York City as a tropical storm. Global and U.S. stock markets are sharply higher on a combination relief rally (relief that damage from Irene was less than anticipated), a mega merger between two Greek banks, and higher than expected consumer spending.

Income rose in line with expectations in July, climbing 0.3%, however, adjusting for inflation income fell 0.1%. As highlighted above, spending also rose more than expected, up 0.8%, meaning consumers cut into their savings to make their purchases. The savings rate fell to 5.0% from 5.5% during July. It will be interesting to see if consumers will continue to be willing to dip into savings to maintain consumption.

The remainder of this week contains substantial economic date including the Case Shiller’s home price index, the Conference Board’s consumer confidence report, the minutes of the FOMC’s August meeting will be released on Tuesday, and the ISM manufacturing report. Finally, on Friday the labor reports for the month of August will be released, with expectations for total payroll growth to drop from 117,000 to 80,000 which includes a loss of 30,000 government jobs.

This morning bonds continue the retreat begun on Friday afternoon as we see mortgage pricing worse by .50% to .625%. The DOW is in rally mode, trading north of 11,400, up 175 points on the day.

Market commentary

Initial jobless claims rose more than expected for the week ending August 20 to 417,000, which is now 19 of 20 weeks that claims have been above 400,000. Bond prices have improved after the release of this data and stocks are retreating. Later today the U.S. Treasury will auction $29 billion of 7 year notes after a fairly successful 5 year note auction on Wednesday.

We are now less than 24 hours from Fed Chairman Bernanke’s speech scheduled on the last day of the Jackson Hole central bankers’ conference. The title of the speech is “Near and Long Term Prospects for the U.S. Economy”. Speculation remains about the content of the speech and what monetary policy tools Bernanke may reference. Keep in mind, however, the Fed has policy has reached unprecedented levels of accommodation and the U.S. economy still struggles. The real problems now are fiscal and regulatory in nature, as the President and Congress have low marks for leadership and understanding of policies that promote growth. One could say fiscal and regulatory policy has mostly stifled the benefit from the Fed’s easy monetary policy.

After Wednesday’s decline and mid-day price changes for the worse, mortgage prices are improved this morning by approximately .125%.

Market commentary

Tuesday’s broad stock market rally came in the face of week economic data as investors hope for additional action by the Federal Reserve to support the U.S. economy. In economic data this morning, mortgage applications fell for the week ending August 19 despite record low rates, while Durable goods orders rose 4.0% in July, a significantly better number than economists expected.

Post data release this morning stocks are taking a breather and bonds continue to rachet towards higher yields. The 10 year note began Tuesday morning at 2.10% and is now sitting at a yield of 2.20%. Mortgage prices declined yesterday with most lenders worsening prices mid-day, and mortgage prices are lower again today by approximately .25%.

The U.S. Treasury will auction 5 year notes this afternoon after Tuesday’s fairly successful auction of 2 year notes.

Market commentary

Weak data regarding new home sales and manufacturing is not enough to thwart a rally in the stock market. A rally based on hope the Fed will offer additional stimulus to get the economy rolling again. Recall, this week the U.S. central bank is hosting central bankers from around the globe at a conference in Jackson Hole, WY. The markets are anticipating Fed Chairman Bernanke will offer QE3 at his closing speech on Friday.

Speaking of the Fed, Bloomberg finally obtained documents through the Freedom of Information Act regarding the Federal Reserve’s activities in the midst of the 2008 financial meltdown. What these documents revealed was a much deeper crisis than was known. We all knew the dollar amounts doled out by the bailout fund, but what was not known was how much direct intervention was provided by the Federal Reserve to Morgan Stanley - $107.3 billion, Citigroup - $99.5 billion, Bank of America - $91.4 billion, as well as foreign banks including Royal Bank of Scotland Plc - $84.5 billion, UBS AG - $77.2 billion, and Hypo Real Estate Holding - $28.7 billion. In addition, Bloomberg reported that on the promise of confidentiality, Barclays Plc borrowed $66 billion and Deutsche Bank AG borrowed $66 billion. Clearly the financial system was in serious distress and one has to wonder if things are much different today.

The last item of note today is Treasury will be selling $35 billion in 2-year notes, so stay tuned.

Market commentary

There is little economic data this week with new home sales, durable goods orders and the University of Michigan consumer confidence survey headlining the reports. The main focus will be the annual central banker’s conference held in Jackson Hole, WY, and Fed Chairman Bernanke’s speech on Friday morning. There is some speculation Bernanke may announce up to $500 billion of QE3, although with the heavy dissention among the open market committee members this may be tough to push through. Still, some analysts feel QE3 is priced into the bond market, so if there is no Fed buying bond yields could push higher.

Market commentary

Thursday was a brutal day for global stock markets. The euro zone crisis led the sell-off, and the dismal Philadelphia Fed index of manufacturing report exacerbated the negative sentiment. The Philly Fed index plummeted from 3.2 to -30.7 in August, with every sub-component turning negative. Immediately following this report the yield on the 10 year note fell to 1.97% and finally closed the day 2.06%. This morning bonds are slightly worse with the yield on the 10 year currently at 2.10%, as stock markets seem to have found support---so far. We will have to wait and see how the day progresses.

With home prices low and mortgage interest rates are at historically low levels, first time home buyers and move-up buyers have a great opportunity to get the home for which they have been waiting.

Market commentary

This morning we were told Producer Prices in the U.S rose more than forecast in July increasing .02%, with the core rate, which subtracts out food and energy prices, rising .04%. And it should come as no surprise that mortgage applications rose for the second week in a row, increasing 4.1% for the week ending August 12.

Normally, higher inflation data would negatively affect bond prices; however, bonds are flat this morning after putting in a stellar performance Tuesday. Mortgage prices will be within a few basis points of HSOA’s Tuesday’s price improvement.

Market commentary

Monday’s market close has U.S. stocks firmly higher and Treasuries lower in price; higher in yield. Mortgage prices ended lower as well, forcing many lenders to worsen pricing mid-day.

This morning U.S. stock markets are falling on weak economic data out of Germany and a fall in U.S. housing starts. Housing starts fell 1.5% in July with building permits declining 3.2%.

One has to question the relevancy of this, but the rating agency Fitch has affirmed the AAA rating for the U.S. and kept the outlook stable. In the rating agency’s report, they cite the positive nature of the Budget Control Act in signaling a “political commitment to place U.S. public finances on a sustainable path consistent with the U.S. sovereign rating remaining AAA.” However, Fitch also warns in its report that failure by the Joint Select Committee to reach an agreement by its November 23 deadline would make the rating agency “less confident”.

While bond prices have improved this morning it is not enough to overcome the losses from Monday, so we see mortgages .255 to .375% worse in price.

Market commentary

Last week will be required study in business and economics classes as the Dow had four consecutive 400+ point moves for the first time in its 115-year history, and the U.S. lost its AAA rating along with the GSEs and 11,500 municipal issues. If it were not for the mess in Europe yields on U.S. Treasuries most likely would have soared. Speaking of Europe, tomorrow an announcement is expected from a meeting between the French and German leadership on a possible solution to the financial crisis

This week’s data began with the Empire manufacturing index from the New York Fed which showed a -7.72 reading for the month of August. This was down from -3.76 in July and reflects continued contraction in the manufacturing sector. The remainder of the week is heavy with data including the Producer Index, the Consumer Price Index, Leading Economic Indicators and existing home sales.

So far Monday is off to a quiet start with bond prices unchanged from the close on Friday and stocks slightly higher.

Market commentary

Thursday’s rebound in stocks couple with a very poor 30 year bond auction hammered bond prices, pushing yields higher across the board. This morning retail sales were reported higher, however, consumer sentiment as measured by the Reuters/University of Michigan survey, fell to 54.9 from 63.7.

In reaction to the data U.S. stock markets continue to move higher and we also have an improving bond market. Volatility this week has been extreme and is expected to continue as solutions for the financial and economic problems in the U.S. and abroad appear to be off in the future.

The good news for this weekend is those folks shopping for their first home, a new home, or looking to move up, have access to the lowest interest in decades!!!

Market commentary

U.S. stock prices are receiving a boost this morning on the report that jobless claims fell to 395,000 last week, a decline of 7,000. This is the lowest level of unemployment claims since the first week of April.

The financial problems in Europe are taking on a new twist with rumors out on Wednesday that French sovereign debt was about to be downgraded, and this morning a report from Reuters says that an Asian bank has cut lines of credit to major French banks. Shares of France’s two largest banks, Societe General and BNP Paribas, have declined sharply this week, and it is clear after the financial crisis in 2008 that banks and other financial firms are more aggressive at reviewing counter party risk.

Market reaction to this morning’s data and news is a reverse of what we have experienced in the past few days. The “risk free” trade of buying U.S. Treasury bonds is unwinding as investors move into stocks. The yield on the 10 year note is now trading at 2.19%, up from 2.14% at the market close on Wednesday. Mortgage prices are lower by .25% to .375%.

Market commentary

The language from Tuesday’s Fed announcement was very direct for a change. "The Committee currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013." What is unusual is the fact that three members of the FOMC dissented, meaning they did not agree with the Fed’s long term language.

Stock markets soared on this news and investors continued to pile into the safe haven of U.S. Treasuries, Swiss francs and gold. This morning we see a reversal with stocks sharply lower, giving back most of Tuesday’s gains. Interest rates continue the march lower as investors seek the safety and liquidity provided by the U.S. Treasury market.

Still on the topic of Treasuries, the Treasury Department will be auctioning $24 billion of 10 year notes today, the results of which should be posted at approximatley 1:15 PM, EDT.

Market commentary

A lack of confidence hit the global stock markets Monday as investors moved out of riskier assets and sought the safe haven quality of gold and the liquidity of U.S. Treasuries (in spite of the S&P downgrade). So far the response from most U.S. leaders has been to shoot the messenger as opposed to solving the actual problem.

Today the U.S. Treasury begins its refunding by auctioning $32 billion of 3 year notes. As the first auction since the downgrade the demand will give us an indication of confidence, as demand on the last few 3 year auctions has been historically high.

The main event of the day is the Fed meeting, with the markets anxiously awaiting comments from Chairman Bernanke as to what response, if any, the Fed will have to weakening economic growth and recent rout in global stock markets.

As of this writing U.S. stock markets are rebounding from Monday’s steep decline and U.S. Treasuries are moving higher in yield. After closing at 2.31% Monday afternoon the yield on the 10 year note has climbed to 2.385% and prices on mortgages are worse by .25% to .375%.

Market commentary

The posturing and not so subtle hints by Standard and Poor’s came to a head Friday evening as the rating agency downgraded U.S. long term debt from AAA to AA+. The downgrade only applied to long term debt and the U.S. short term rating of A-1+ was affirmed. S&P left U.S. long-term debt on negative outlook saying that there is a one-in-three chance that the rating is cut again over the next two years.

This morning, markets are reacting to the move with the yield on the 10 year note falling from 2.55%, the close on Friday, to 2.35%, gold setting a new record high at $1,707 per ounce, and the U.S. stock markets deep in negative territory. The one piece of good news is the price of oil is down to $84 per barrel.

The main concern now is the market reaction to a downgrade of GSE and municipal debt which S&P will address today. It seems the Federal Open Market Committee (the Fed) will not be at a loss for discussion topics at tomorrow’s meeting.

Market commentary

After five straight days of a rally in the U.S. Treasury market, today is the reversal of that trend. Non-farm Payrolls grew 117,000 in July, higher than the estimate of 85,000. June was revised up to 46,000 from 18,000. Combing through the details, 154,000 private payrolls were created and the unemployment rate dipped to 9.1% from 9.2%.

Overall the employment data was positive, however, job growth needs to be at 200,000 plus per month to begin to absorb the jobs lost over the past 3 years.

Global stock markets have been hammered the past two days, and although the positive jobs data in the U.S. gave some relief, the problems in the European Union continue to threaten financial stability.

The U.S. stock market’s initial reaction to this morning’s jobs report was positive, however, that has quickly reversed to another steep decline. U.S. Treasury prices are lower as well with the yield on the 10 year note now standing at 2.45%, up from 2.41%. Mortgage prices are worse between .375% and .50%.

Market commentary

Jobless claims for the week ending July 30 decreased 1,000 to 400,000; a welcome improvement. This is not enough, however, to repair the dismal labor market, and is the last piece of data on the labor market prior to Friday morning’s Labor Department report on job growth and the unemployment rate. Economists are projecting employers added 85,000 workers in July and the unemployment rate will hold above 9%.

This data had little effect on the markets as concerns about Spain and Italy grow. The overnight rate banks charge each other is increasing and some European banks are being shut out of the market. The European Central Bank has stepped in to provide liquidity to these banks. Global stock markets are being hit hard, including markets in the U.S. with the DOW lower by 250 points. U.S. Treasuries, the Swiss franc and gold are all beneficiaries of the flight to safety. The yield on the 10 year note has fallen to 2.51% and mortgage prices have improved by another .375%. Yes, you may expect volatility to continue.

Market commentary

Tuesday stocks were hammered and bond yields hit new 2011 lows amid fresh concerns about the U.S. economy and the shaky euro zone. New fears are emerging about Italy and Spain, two economies with enough external debt to create much larger problems than those created by Greece, Ireland, and Portugal.

This morning the ADP Employment Report showed a gain of 114,000 private payrolls for July, better than some analysts had expected. However, it is still very weak compared to the target of 200,000 and higher needed to make a dent in the unemployment rate. In addition to the ADP report, the Institute for Supply Management reported its index of non- manufacturing businesses, which covers about 90 percent of the economy, dropped to 52.7 from 53.3 in June. This reflects that service industries expanded in July at the slowest pace since February 2010.

The market reactions to today’s news and data is similar to the past few days; stock markets are weak while U.S. Treasuries continue to experience a flight to safety bid. Mortgage prices are improved by approximately .375%.

Market commentary

The decline in the ISM manufacturing report spooked the markets yesterday sending investors into bonds. The 10-year Treasury traded from 2.82% down to 2.72% immediately following the release, eventually closing at 2.74%. This morning the attention of investors is now shifting from wait and watch Washington to concerned about the trajectory of the U.S. economy

Personal spending for the month of June fell 0.2%, its first decline since September 2009. Spending on energy fell 4.5%, contributing heavily to the drop in overall spending. Personal income rose slightly for June coming in up 0.1%.

In addition to the weak U.S. economic data, the “European” fear trade is also carrying over into this morning’s activity. I know, you probably thought this had gone away since the U.S. media has been focusing exclusively on the U.S. deficit/debt ceiling debate for the past week, however, debt yields for Italy, Spain, and Greece have spiked in recent days. Combining weak economic data and the concerns in Europe, there is a flight to quality occurring again and the yield on the 10 year note has dropped to 2.69%. Mortgage prices are better by .25%.

Market commentary

The mantra of President Clinton is returning and it is more true today than during his tenure; “it’s the economy, stupid”. We see this again this morning with the ISM Manufacturing Index falling to 50.9 from 55.3, while a small dip to 54.5 was anticipated. The Prices Paid component dropped dramatically to 59.0 from 68.0, however, the most critical component was that New Orders dipped below 50 to 49.2 from 51.6 in June. Recall that a reading below 50 reflects business is actually slowing versus growing at even a moderate pace.

Our leaders in Washington D.C. have yet to agree on a budget or debt ceiling compromise, so the markets remain wary and skittish. As the rating agencies have repeatedly stated, raising the debt ceiling alone will not avoid a cut in the AAA rating of the U.S. There has to be some responsible deficit reduction plan in place.

The weak economic data has pushed Treasury yields lower this morning, with the 10 year note now trading at 2.73%, and the DOW is now trading less than 100 points above the 12,000 level.