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.