Market commentary

Stocks put in a decent day Thursday, as did U.S. Treasuries. The yield on the 10 year note fell 2 basis points to 1.90%. So far this morning, the start of the last trading day of 2011, stocks and bonds are both flat, and remember, the bond market will close early today. The HSOA lock desk will close at 12 noon, Pacific Time.

We at Home Savings wish you, our partners, a Happy and Prosperous New Year!

Market commentary

Concern about the solvency of several European banks and the continued high yields many European countries have to pay to refinance or issue new debt is again taking its toll on the markets. This was the driver pushing U.S. Treasury yields lower on Wednesday.
Today brings the last real economic data for the year, beginning with initial jobless claims for the week ending December 24 rising from 366,000 to 381,000. While the figures reflect a 15,000 jump in initial claims, 381,000 is still well below 400,000 and continues to point to an improving labor market.

In a sign American manufacturing is weathering the slowdown in Europe; the Institute for Supply Management-Chicago Inc. said today its business barometer decreased slightly to 62.5 from 62.6 in November. Most analysts had expected a more pronounced decline, and recall readings above 50 signal growth.

And finally, the number of Americans signing contracts to buy previously owned homes rose 7.3% in November, more than forecast as falling prices and low borrowing costs boosted demand. I think most of us agree now is a great time to buy a home, assuming one is secure in their job and source of income, and can produce the documentation to qualify for a loan!

Pricing for mortgages are flat from the close on Wednesday.

Market commentary

The week between Christmas and New Years Day is always quiet and with no economic data today, one would expect quiet trading. However, on relatively light volume we see U.S. Treasuries in rally mode pushing the yield on the 10 year note from 2.005 down to 1.935%. The good news for mortgage borrowers is that pricing has improved by .375% from Tuesday.

Remember, this is a holiday shortened week for the bond market with an early close on Friday.

Market commentary

Housing prices fell in October according to the S&P CaseShiller report released this morning, bringing the year-over-year price decline to 3.40%. The only metropolitan area reporting an increase was Phoenix, with the biggest drops coming in Atlanta, Detroit, and Minneapolis.

The report noted that foreclosures had a significant impact on prices and that the supply of those homes remains pretty high in parts of the country. Clearly the sooner foreclosure inventories are absorbed; it will eventually lay a foundation for a more healthy housing market. One wonders if regulators and politicians realize this, as servicers struggle to clear the backlog of delinquent mortgages and properties in foreclosure.

On a more positive note, according to the Conference Board its index of consumer confidence increased to 64.5, the highest reading since April of this year. The boost in confidence is attributed to the positive trend reported in the unemployment numbers for the past two months.

After this morning’s data the stock and bond markets are trading relatively unchanged from the close on Friday. Mortgage prices, however, are worse by .25%.

Market commentary

Durable goods orders for the month of November rose 3.8%, well above the expected increase of 2.2%. However, most of the increase came from aircraft orders, so ex-transportation, orders for rose just 0.3%.

Personal income and spending both disappointed for the month of November. Both measures rose just 0.1%, which means when adjusted for inflation, income is declining. This highlights the inadequacy of the unemployment rate as an indicator of actual spending and is one of the reasons economic growth will be muted in 2012.

On a positive note, new home sales increased 1.6% in November to a seven month high. Bond prices had trailed off slightly prior to the housing data, but the unexpected jump pushed prices sharply lower. The yield on the 10 year note has risen above 2.00% to yield 2.03%, while mortgage prices are worse by .375%.

The bond market has an early close today and the HSOA lock desk will be closing at 12 noon, Pacific Time.

Market commentary

Positive economic data across the board this morning began with initial jobless claims for the week ending December 17, which fell from 368,000 to 364,000. This is the lowest level for initial jobless claims since April 2008.

The Thomson Reuters/University of Michigan index of consumer confidence rose to 69.9 from 64.1 at the end of November. As a reference point, this index averaged 89 in the five years leading up to the recession that began in December 2007.

And finally, the Conference Board reported its index of Leading Indicators (LEI) rose 0.5% after a 0.9% October increase. The LEI index is an indication of how well the U.S. economy will perform over the next 3 to 6 months.

On this data U.S. stocks are trading slightly higher as are Treasuries. U.S. Treasuries had tough day on Wednesday, and are struggling to maintain this morning’s gains. Mortgage pricing is better by .125%.

Market commentary

U.S. stocks had a stellar day Tuesday to the detriment of the bond market. Yields rose across the board with the 10 year rising 12 basis points to close at 1.92%---it is trading at 1.94% this morning.

Another report showing improvement in the housing sector came from the National Association of Realtors telling us existing home sales rose 4.0% in October. This on the heels of Tuesday’s increase in housing starts and building permits.

Europe is back in the news as the ECB offered banks 490 billion Euros in loans in continued efforts to provide liquidity and ease the fears of a credit crunch. This helped provide a short-lived stimulus to the markets; however, as of this writing U.S. stocks are in the process of giving back some of Tuesday’s gains while Treasuries have risen slightly. Mortgage prices are worse by .125%.

Market commentary

Strong data today from the housing sector has U.S. stocks rocketing higher this morning. Housing starts jumped to 685,000 and building permits were up 5.7%, both exceeding forecasts. Multi family units were the majority of the improvement, which in time should ease the pressure on rents.

Dysfunction is again making headlines in Washington D.C. as lawmakers haggle over the extension of the payroll tax cut time (whether it should be extended temporarily for 2 months or for 18 months) and other issues. Again, a lack of leadership which could bring the government to a halt by the end of the year.

After a nice rally Monday bond prices are sharply lower pushing yields higher. After closing at 1.81% the 10 year note is trading at 1.90% this morning. Still on tap for today is a $24 billion auction of 7 year notes by the U.S. Treasury.

Maarket commentary

Monday morning and no economic data releases scheduled for today. The Asian stock markets were nervous overnight on the news of North Korea’s Kim Jong Il, and the markets are also digesting the credit downgrades of several European countries. U.S. Treasury prices are flat to Friday’s close as are mortgages. The yield on the 10 year note is trading at 1.85%, the previous low yield in the midst of the Euro crisis.

Market commentary

In today’s only economic release, consumer prices for the month of November were flat month over month, bringing the headline year-over-year rate of inflation down to 3.4%. At the core level, excluding food and energy, prices increased slightly more than expected, rising 0.2%. As the government measures it, inflation is slightly higher than policy makers prefer, however, the Fed still believes at current levels of inflation they will have the tools to continue economic stimulus.

There is still no solution in sight to the European financial crisis, and therefore, U.S. bond prices remain strong with the yield on the 10 year trading at 1.88%. Mortgage spreads have widened this morning so pricing remains flat from Thursday.

Market commentary

A full calendar on the economic front today begins with the Producer Price Index. The PPI came in slightly higher than expected, rising 0.3% month over month in November, and was driven mostly by higher food costs. The core PPI (excluding food and energy) rose only 0.1%.

The New York Fed manufacturing index rose much more than expected from 0.61 to 9.53 with the underlying employment and new orders indices both rose from negative to positive range.

Finally, initial jobless claims for the week ending December 10 dropped dramatically from 385,000 to 366,000, the lowest reading since 2008.

Bond prices have been on fire this week on more concern about Europe. The 10 year Treasury yield dropped to 1.86% overnight, however, after the morning’s positive economic releases, has risen back up to 1.94%. Mortgages are flat to a few basis points worse in price from Wednesday.

Market commentary

Treasuries rallied Tuesday as the markets expressed displeasure with the results of EU financial summit. As investors moved to the safety of U.S. Treasuries there was strong demand for the 10 year note auction, pushing the yield down to 1.97%. In addition to the disappointment in the EU summit, the Fed announced it will continue to be in an accommodative position, likely keeping rates at near zero through mid-2013. Stocks turned negative after the statement was released as a handful of analysts were expecting the Fed to hint at a new round of quantitative easing.

This morning U.S. stocks are again trading in negative territory and Treasury prices are moving higher. The yield on the 10 year note has fallen to 1.925% and mortgage prices are better by .25%.

Market commentary

The markets gave their opinion on the “grand bargain” from last Friday’s European Union Summit yesterday with stocks dropping and bond prices rising. All of the major European stock markets closed broadly lower, as did the U.S. markets.

This morning we saw a somewhat disappointing report on retail sales for the month of November, which were up 0.2%, while expectations were for an increase 0.6%. Inside the report we saw electronics sales were up 2.1%, but building material sales fell 0.3% and food/beverage sales were down 0.2%. It appears that consumers have shifted to holiday purchases and have shifted away from other categories of spending.

Today is day two of this week’s Treasury auctions with an offering of $21 billion of 10 year notes. Given the turmoil in Europe expectations are for demand to be fairly strong. Wednesday the Treasury will auction $13 billion of 30 year bonds.

The Fed’s final meeting of 2011 is today with an official Statement being released at 11:15 p.m. PT. It is expected the Fed will not change their policy positions at this meeting, with the tone of the economic assessment to be slightly improved.

Mortgages are following Treasuries lower today with pricing worse by .25% to .375%.

Market commentary

U.S. stocks are sharply lower this morning on disappointment from Friday’s European Financial Summit. While the summit produced some positive headlines most of the difficult problems remain unaddressed, causing Moody’s to place all EU members on review for possible downgrade. U.S. Treasuries have won back most of Friday’s losses as investors again seek the perceived safety of U.S. debt. The yield on the 10 year note has fallen from 2.06% to 1.995%.

While there is no economic data on the calendar for today, this week is full with releases on inflation, industrial production, and manufacturing activity. The main event will be tomorrow’s Fed meeting with the accompanying rate decision and general statement on the economy.

In addition to the full economic calendar the U.S. Treasury will auction 3 year notes today, 10 year notes on Tuesday and 30 year bonds on Wednesday.

The Labor Department reported jobless claims dropped by 23,000 to 381,000 in the week ended Dec. 3. This is the fewest since February, and it is too early to tell if this is a trend or the result of temporary hiring for the holiday season.

The European Central Bank lowered its target lending rate to 1% this morning and ECB president Mario Draghi said the ECB was pursuing more non-standard measures to fight the crisis, including unlimited three-year loans to banks and looser collateral criteria. The markets, however, were disappointed the ECB did not comment further on the possibility of buying debt. This keeps the EU Summit scheduled for Friday front and center on the minds of the global financial community.

Stock and bonds in the U.S. are relatively flat from the market close on Wednesday, as are prices on mortgages.

Market commentary

The economic calendar is light today with the only data coming from the mortgage sector. Mortgage applications for the week ending December 2 bounced back from the previous week’s decline, rising 12.8%. This was driven by a 15% increase in refinance applications and an 8% jump in purchase apps.

It is not an exaggeration to state that the entire global financial community is watching and waiting for the results of the European financial summit scheduled for Friday. U.S. Treasury Secretary Geithner is meeting with leaders this week to help facilitate negotiations and solutions. Any reasonable solution/agreement will certainly cause a selloff in U.S. Treasuries (meaning interest rates will move higher) as investors begin allocating resources to more risky investments. Assuming said agreement is reached I suggest locking prior to Friday.

Market commentary

The fickleness of the markets was evident again yesterday as we saw stock rally early in the day with Treasuries in sell mode. Mid-day S&P announced they were putting 15 European countries on negative credit watch, which caused an immediate deterioration in stocks and a move higher in bond prices. After reaching a yield of 2.11% Monday, the 10 year note is trading at 2.06% this morning.

There is no U.S. economic data this morning and mortgage prices have improved by approximately .125%.

Market commentary

This week will be light on economic data but big on euro drama. The main event of the week will be the EU summit beginning on Friday. The expectation is that a cohesive and substantive agreement will be unveiled at this time, although most have lost confidence in the EU leaders’ willingness to deliver on these big agreements. Anything short of this will extend the global market turmoil.

This morning we saw the November ISM non-manufacturing index, which dropped from 52.9 to 52.0. This is weaker than was expected, although it still reflects a growing economy, but a very slow growth economy. The most concerning portion of this report was a substantial, and unexpected, drop in the employment sub-index. The employment measure dropped from 53.3 to 48.9, the second lowest reading since the economy was still emerging from recession back in the Spring of 2010. This is a big divergence from November’s nonfarm payroll service-sector figures.

The overall positive ISM report and hopefulness of this Friday’s EU meeting has stocks in rally mode again. As one would expect, the rally in stocks is pushing bond prices lower. Mortgage pricing is worse by .125% to .25%.

Market commentary

This morning it is all about the November labor reports. Total nonfarm payrolls rose 120,000, slightly below expectations of +125,000 but well below the rumored 180,000 to 200,000. There were also 52,000 jobs added to the September report and 20,000 added to the October report. The public sector lost 20,000 while the private sector gained 140,000. Average weekly hours worked were flat at 34.3 but on the negative side, average hourly earnings fell from $23.20 to $23.18.

In the household report, the unemployment rate fell from 9.0% to 8.6%. Before getting too excited about the drop in the unemployment rate, the main reason this percentage fell is due to 315,000 folks dropping out of the labor force entirely.

Treasuries initially sold off on the seemingly strong jobs data, however, as the markets digested the details bond prices reversed and are now higher on the day. Mortgage pricing is better by approximately .125%.

Market commentary

Wednesday the Dow rose 490 points, blowing through 12,000, on a swing in market sentiment resulting from the coordinated efforts of major central banks around the world, and positive economic data in the U.S.

This morning initial jobless claims jumped back above 400,000 to 402,000 for the week ending November 26. This is the first time in five weeks that the measure has been above 400,000.

With some positive news, the November ISM Manufacturing Index rose more than expected 52.7 from 50.8. Expectations were for a small increase to 51.8. Overall this was a solid national report confirming that orders are still outpacing production.

Keeping with this week’s pattern, Treasury and mortgage bonds are opening weaker, with mortgage prices worse by .25%.

Market commentary

If the ADP employment report is to be a reasonable indicator, Friday’s payroll report could be encouraging. The ADP report projects that 206,000 private payrolls were created in November, well above expectations. The majority of the increases are coming from smaller businesses as those with 1 to 49 employees accounted for over half of the jobs.

Mortgage applications fell 11.7% for the week ending November 25 as applications for refinance dropped over 15%, despite lower mortgage rates. The four week moving average for the refinance index has fallen 16% over the past six weeks while mortgage rates have fallen 10 to 20 basis points.

As a result of the inability of Europe to solve their financial crisis, the world’s major central banks acted jointly Wednesday to provide dollar liquidity to major European banks that have been facing credit and liquidity problems as investors and depositors pull funds from those troubled banks. Global stock markets rallied sharply on the news, including the U.S., where the DOW is trading higher by 400 points. The risk-on trade is driving U.S. Treasury prices lower/yields higher. As a result, mortgage pricing is worse by .125% to .250%.

Market commentary

Treasury yields pushed higher Monday morning with the 10 year reaching 2.08% before rebounding late in the day. U.S. stock markets were giddy from reports of strong Thanksgiving holiday retail sales and investors pushed the DOW up 292 points.

This morning we were told housing prices for the month of September fell more than expected according to the latest S&P CaseShiller home price report. Prices fell 0.57% month-over-month to bring year over year prices to -3.59%.

On the positive side, consumer confidence for the month of November lurched higher, rising from 40.9 to 56.0, according to the Conference Board. Partial credit for this increase was given to the bounce in the equity markets during the month of October. Keep in mind since the survey was taken in mid November, the DJIA has dropped 479 points, new euro zone fears emerged, the deficit super-committee proved futile, and Fitch cut the U.S. long-term debt outlook to negative.

In reaction to the data and no negative news from Europe, U.S. stock markets are posting solid gains again this morning while Treasuries give back most of Monday afternoon’s improvement. Mortgage prices are flat to slightly worse from Monday’s late day price improvement.

Market commentary

Strong retail sales over the Thanksgiving weekend and semi-positive news on developments in Europe that may ease the financial crisis are fueling a stock market rally this morning. As one would expect with investors stepping into riskier assets bond prices are falling, sending yields higher. The price of the 10 year note is lower by .625%, pushing the yield back to 2.035%.

This is a data heavy week beginning with the Commerce Department reporting new home sales increased 1.3% in October, which was slightly lower than expectations. Later in the week ADP will release its forecast for new job creation, and on Friday, the Labor Department will share its version of new job creation for the month of November. Currently, expectations are for an increase of 116,000 new jobs created with the unemployment rate remaining at 9.0%

The decline in the Treasury market is pulling down mortgages as well. Pricing is worse by .125% to .375%.

Market commentary

After a day of rest and thanksgiving, U.S. markets open to reports of strong “Black Friday” sales and a worsening financial crisis in Europe. U.S. stock markets are trading higher while the Treasury market trends lower. The yield on the 10 year note closed at 1.92% Wednesday and is currently trading at 1.965%.

The news from Europe is worse by the day. Investors required a yield of 6.5% to absorb 6 month debt in an Italian note offering today, and yields on Italy’s 2 year notes hit a record 8%. Borrowing costs across Europe are soaring, which will make the debt and deficit problems even worse as more of a country’s budget will be required for higher interest payments. U.S. leaders and politicians should take note; there is a limit to what the markets will bear.

The U.S. bond market closes early today, so the HSOA lock desk will close at 12 noon, PT.

Market commentary

This morning we received a number of economic reports. Initial jobless claims last week rose 2,000 to 393,000. Durable goods orders were a mixed bag with November’s better than expected performance being offset by downward revisions to September. Personal income was up slightly while personal spending was softer than expected. The U.S. savings rate continues to steadily decline from its 2010 and 2011 highs, which is contributing to the increase in spending.

Germany received a wake up call today on a failed debt auction in which the German debt agency had to retain almost half of a 6 billion euro offering due to a shortage of bids. While the failed auction pushed 10 year yields in Germany to just slightly over 2%, well below its European brethren, it is a clear sign investors are shying away from Europe. European leaders have strongly opposing views on how to resolve the financial crisis, which for now tells investors there is no resolution.

In the U.S., stock markets are under pressure and broadly lower with yields on Treasuries flat from Tuesday’s close. Mortgage prices are worse by a few basis points.

Market commentary

Stocks were pummeled Monday as investors reacted to the failure of the U.S. deficit reduction panel to reach an agreement and to the growing financial crisis in Europe. The Dow dropped 249 points while the S&P 500 ended the day at 1,182, its lowest close in over six weeks. Treasuries rallied early and managed to hold their gains with the 10-year closing at 1.95%. The turmoil in European debt markets created stellar demand for the U.S. Treasury’s two year note auction, so we will see if that carries over to today’s auction of $35 billion in 5 year notes.

Economic data this morning consists of the first revision to the third quarter GDP, which was revised lower from 2.5% to 2.0%. Later today we will get the FOMC Minutes.

U.S. stock and bond markets are trading flat after digesting Monday’s volatility and will most likely quiet down as folks wind down towards the Thanksgiving Day holiday. Prices on mortgages have improved slightly.

Market commentary

The debt crisis in Europe appears to have no solution and is causing investors to push interest rates for many countries to unsustainable levels. The demand for higher yield will hurt these countries as they attempt to issue new debt or roll over existing debt.

Stocks around the world are down this morning, including in the U.S. The DOW traded lower by over 300 points and is currently hovering near that mark. U.S. Treasury prices have improved; however, even U.S. debt is coming under scrutiny. Investors in U.S. debt are losing confidence in the country’s political system as the U.S. deficit panel failed to reach agreement on reining in the ballooning U.S. debt. The yield on the 10 year note hit a low yield of 1.95% early this morning and is currently at 1.97%. Mortgage prices are slightly improved from Friday.

Market commentary

The bond market improved Thursday and U.S. stocks fell sharply as the “euro fear” trade that we have seen for several weeks once again came to the fore. The yield on the 10 year Treasury yield fell to 1.93% intraday but is back up to 2.02% this morning. There were reports yesterday that the European Financial Stability Fund may not backstop Italy, in addition to growing concern about the liquidity in European markets.

Economic data in the U.S. economic data has looked incrementally better this week, including today’s report. The index of U.S. leading indicators rose .09% in October, more than forecast, after posting an increase of 0.1% in September. The Leading Indicators Index (LEI) is an outlook on the U.S. economy for the next 3 to 6 months. Nine of the ten components contributed to October’s increase, led by the increase in building permits, the drop in initial jobless claims and a longer factory workweek.

Partially ignoring the financial and fiscal drama in Europe, U.S. stock markets are trading higher this morning as Treasury prices decline. Prices on mortgages are slightly worse.

Market commentary

Producer prices eased month over month 0.3%, driven by lower oil prices, and excluding food and energy, prices were flat month over month. Retail sales for October rose 0.5%, beating estimates of a 0.3% increase. Excluding auto sales, retail sales rose 0.6%. Sales of electronic goods were up 3.7%.

Over all this morning’s reports were positive for the U.S. economy. However, Europe remains the focus of the global markets and resolution of the financial woes in those economies is far down the road. U.S. Treasuries have improved slightly with the yield on the 10 year note at 2.02%.

Market commentary

Excluding today, this week’s calendar is full of economic data. Tuesday we will get an inflation reading from the Producer Price Index and a status on the consumer in the form of Retail Sales data. Late in the week we will have the Consumer Price Index, Industrial Production, Housing Starts and Leading Indicators.

All of this data’s effect on the U.S. markets is nil as the focus continues to be on Europe and the financial crisis that appears to be spreading relatively unchecked. EU policy makers seem unwilling to make the tough decisions; however, the longer they wait the more likely it is the markets will make the decisions for them.

For today, U.S. stock markets are trading slightly lower with Treasury prices flat from the close last Thursday. Mortgage prices are worse by approximately .125%.

Market commentary

The yield on the 10 year note fell to as low as 1.93% Wednesday as the turmoil in Europe drove investors out of risk assets and into the perceived safety of U.S. Treasuries. However, given the over borrowing of and spending of governments around the globe, even the flight to safety into U.S. Treasuries did not help yesterday’s 10 year note auction which had a weak bid to cover ratio. This does not bode well for today’s auction of $16 billion of 30 year bonds.

In this morning’s economic data, initial jobless claims dropped from 400,000 to 390,000 for the week ending November 5. Import prices in October fell more-than-expected, dropping 0.6% with energy and food prices leading the declines.

U.S. stock markets are rebounding this morning after Wednesday’s thrashing and bonds are trading lower. The yield on the 10 year note is back to 2.05% and mortgage prices are worse by .25%.

Market commentary

Mortgage applications rose 10.3% for the week ending November 4, led by an increase of 12.1% in refinance applications and a 4.8% increase in purchase applications. Later today the U.S. Treasury is scheduled to auction $24 billion in 10 year notes today, following a fairly successful 3 year note auction on Tuesday.

Of course, Italy and Greece remain in the forefront of financial news and continue to drive market volatility. Borrowing costs for these countries have skyrocketed and the European Union is not taking decisive action to stem investor fears. As a result, U.S. stock markets are selling off sharply U.S. Treasuries are benefiting from a flight to safety bid. The yield on the 10 year note has fallen to 1.96% and mortgage prices have improved by approximately .25% to .375%.

How do we know for certain our government has run amuck and is completely clueless? This week the U.S. national debt will cross the $15 trillion mark and today the Obama administration’s Agriculture Department announced a 15 cent tax on Christmas trees that will fund a Christmas Tree Promotion Board which will “provide maximum benefits to the Christmas tree industry”, and “will improve the image and marketing of Christmas trees”. You just can’t make this stuff up!

Market commentary

U.S. stock and Treasury markets are trading flat this morning; undecided on which way to move as they await the outcome of a crucial vote in Italy. The indecision surrounding the Greek and Italian financial woes, along with the financial problems in other European countries continues to grab headlines and drive volatility in the markets. The bad news is there does not appear to be a resolution in sight.

Mortgage prices are slightly improved from the close on Monday.

Market commentary

This is a shortened, quiet week in terms of U.S. economic data with the bond market closed on Friday in honor of Veteran’s Day. Last Friday Greek Prime Minister Papandreou survived the confidence vote, so in theory his government will now approve the bail-out package offered by the EU.

The focus now has turned to Italy with rumors that its Prime Minister may resign after a vote on an austerity package. With no U.S. economic data the markets remain focused on the European financial crisis. The major U.S. stock indices are trading lower this morning while treasury yields are falling/improving. Mortgage prices are unchanged to slightly better than Friday.

Market commentary

Nonfarm payrolls for the month of October rose 80,000, including a gain of 104,000 in private payrolls and a loss of 24,000 in government jobs. Recall that expectations were for a 95,000 gain in total payrolls. There was some positive underlying data in the report with sizeable revisions to the last two months’ data, raising the August and September numbers 102,000.

In the household report, the unemployment rate dropped to 9.0% as 277,000 more persons reported as being employed, with the number of long term unemployed falling 366,000 to 5.9 million. Even with the positive pieces of the report this is still indicative of a weak pace of job growth.

Bond prices fell slightly on the after the release of the jobs report, but have since rebounded, and the markets remain focused on events in Europe and what will eventually happen in Greece. As of this writing U.S. stocks are down sharply pushing bonds into positive territory. Mortgage prices are worse by .125% and .25%.

Market commentary

Economic reports this morning included the ISM Non-Manufacturing Index and the weekly jobless claims data. For October the ISM index slipped to 52.9 from 53.0; expectations were for an increase to 53.5. One positive note in the report was the employment index which jumped to 53.3 from 48.7 the previous month.
Initial jobless claims for the week ending October 29 dropped to 397,000 form 406,000 the previous week. This makes just the third week of the past 29 that claims came in below 400,000. In a separate report unit labor costs fell 2.4% in Q3 as part of a 3.1% gain in productivity. This data reflects businesses are seeking to do more with the employees they have versus hiring new workers. For those of us in the mortgage space this is an obvious conclusion!

Again today the markets have generally ignored the economic data and remain focused on the European financial crisis and the results of the Greek referendum. It seems the EU is resigned that the union may be minus one member in the near future.

U.S. Treasury prices are tumbling this morning pushing the yield on the 10 year note to 2.04% Mortgage prices are worse by .25%.

Market commentary

Bond prices rallied sharply on Tuesday as the confidence in the Greek rescue plan continued to erode following an announcement by Prime Minister Papandreou that he would put the plan to a referendum vote. The move caught all EU leaders by surprise and rattled the markets, increasing the risk of contagion and an unraveling of the plan and the EU itself.

This morning, the ADP reported that private payrolls increased 110,000 for October versus expectations of +100,000. Friday’s government jobs report is expected to be similar with current projections for an increase of 95,000.
The big news today will be the conclusion of the Fed’s two day meeting. The markets will be looking for the Fed’s update of their economic forecast and more importantly, the possibility of QE3. The announcement will be followed by a press conference by Fed Chairman Bernanke.

Bond prices are giving back some of the gains from Tuesday with the yield on the 10 year note pushing back above 2.00% to 2.02%. Mortgage prices are worse between .125% and .255.

Market commentary

Just when it seems safe for financial markets to take their eyes off of Europe for a few minutes…comments late Monday from Greek Prime Minister Papandreou calling for a referendum on the proposed bailout package threw the markets and the other European countries a curve ball. This confluence of events seems to be leading the country into default, which is clearly shaking up the global stock and bond markets.

In the U.S. the October ISM Manufacturing Report showed a slight drop with the index falling from 51.6 to 50.8. However, the underlying reports on employment and new orders suggest the manufacturing sector is still treading water and staying afloat.

The markets paid no attention to the U.S. data and are clearly focused on what is happening in Europe. The yield on the 10 year note has fallen to 1.98% and mortgage prices have improved approximately .50%.

Market commentary

U.S. Treasuries are rallying sharply this morning pushing the yield on the 10 year note down to 2.20% after it touched 2.42% last week. It seems we are back to uncertainty in the Euro zone again this morning, which is probably something folks should get used to. Unlike the Federal Reserve in the U.S., there is not one central bank with similar authority, and given the diverse economies of the various countries, a resolution to this financial crisis will drag on.

This week brings us a full economic calendar and a two day Fed meeting, which begins Tuesday and will end Wednesday with the accompanying announcement. And on Friday the markets will get the all important payroll data, with current projections for job growth of 95,000 and the unemployment rate holding at 9.1%.

Market commentary

Europe finally delivered on a bailout plan and stronger than expected U.S. GDP growth sent U.S. stocks soaring Thursday, while creating a rout in the bond market. Adding to the pressure on bonds was a disastrous 7 year note auction.

This morning it was reported that personal income rose less than expected in September, rising just 0.1% at the headline level. Real income, however, fell for the third month in a row at a rate of -0.05%. Despite weak income growth, spending chugged along at a 0.6% growth rate, an increase from 0.2% in August. Given the weak employment picture this is not a sustainable trend for spending to outpace income growth at such a large spread. The result has been a drop in the savings rate to 3.6%, the lowest level since December 2007. Unless real incomes begin to rise it is hard to imagine that consumption will continue at its current pace.

Next Tuesday, November 1, 2011, the Fed will begin another two day meeting amid speculation the Fed will announce an outright purchase of mortgage backed securities, another round of quantitative easing or some other form of market manipulation. Stay tuned.

For today stocks are taking a breather from Thursday’s strong rally and we see a slight rebound in the U.S. Treasury market.

Market commentary

U.S. stocks are sharply higher this morning on what I would consider a relief rally on what seems to be “final” agreement on the Greek debt crisis. In addition, this morning’s report that GDP for Q3 grew at an estimated rate of 2.5% is adding to the stock market euphoria.

Even though the economy is reportedly growing job growth continues to struggle as noted by last weeks’ jobless claims for the week of 402,000, stubbornly remaining above the 400,000 level.

Treasuries gave some ground yesterday, and are selling off again this morning as investors move away from “flight to safety” trade. The yield on the 10 year note is now above 2.30%. Later today the U.S. Treasury will be auctioning $29 billion in 7-year notes and the Fed is scheduled to purchase $2.25 to $2.75 billion in 25- to 30-year Treasuries.

Market commentary

Mortgage applications rose 4.9% last week on upticks in both refinance and purchase applications, as the four-week moving average for refinance applications has doubled in the past five months as mortgage rates have fallen. However, applications remain well below recent peaks.

Durable goods orders fell 0.8%, however, ex transportation orders rose 1.7%, much better than the expected 0.4% increase. The transportation component is volatile as it includes aircraft orders which fluctuate dramatically month over month.

The bond market will be hit with a double dose of supply today as the Fed will be selling $8 to $9 billion of maturities between March `13 and October `14 as part of “operation twist, and the U.S. Treasury will be auctioning $32 billion in 5 year notes.

Treasuries caught a flight to safety bid Tuesday when EU Finance Ministers canceled their Wednesday meeting which was supposed to be the opening discussions of the newest EU summit. There is a large divide in Europe regarding how the bailout should be structured as well as how much of a haircut Greek bondholders should take. The current talk is of haircuts ranging from 40% (favored by the French) to 60% (favored by the Germans).

This morning U.S. Treasuries are trading lower in price/higher in yield and mortgage prices are approximately .25% worse than Tuesday’s mid-day improvement.

Market commentary

Weak economic data has U.S. Treasuries in rally mode this morning with the yield on the 10 year note falling from 2.255 to 2.17%. The Conference Board reported its index of consumer sentiment dropped to its lowest level since March 2009, coming in at a reading of 39.8, down from last moth’s number of 46.4.

On the housing market front the Case/Shiller price index was flat for the 20 MSAs it measures. On a year over year basis the rate of price decline is now only 3.8%.

The FHFA announced changes to the Home Affordable Refinance Program which should help more homeowners take advantage of the low interest rate environment. The key component of modification is which reps and warrants will be waived.

Market commentary

No major economic data on today’s calendar, however, the remainder of the week is full and will include the Case/Shiller home price index, new home sales, Durable Goods orders and third quarter U.S. Gross Domestic Product.

The markets spent most of last week focused on Europe, and that will remain a factor until there is a resolution to the financial crisis. In the U.S. the stock markets are moving higher and bond prices are slumping, pushing the yield on the 10 year note to 2.225%, up from Friday’s close of 2.18%. Mortgage pricing is worse by .25%.

Market commentary

After a busy week of economic releases, there are none scheduled for today. Interest rates continued their slow climb yesterday after a strong reading on the Philadelphia Fed manufacturing index. This index hit a six month high with most sub-components improving, except for the employment portion, which continued to decline.

This morning, stocks are higher in the US and Europe despite word of a delay until Wednesday of a planned meeting to announce a new “plan” to fix the European sovereign and financial crises. Bond prices are lower/interest rates higher again, with the yield on the 10 year note hitting 2.21%.

Market commentary

This morning bond prices are flat and stocks are trending lower. The weekly initial jobless claims were slightly above estimates coming in at 403,000 in the most recent week.
The main focus again today is Europe; the violence in Greece in front of the Greek Parliament’s vote later today on austerity measures, and the fact European authorities are not in agreement on a rescue plan, leaving the world waiting for signs of European stability and leadership.

Market commentary

This morning, the Producer Price Index for September came in well above estimates, rising 0.8% overall and 0.2% at the core level. Year over year, PPI is up 6.9%, its largest such rise since 2009. In addition to gas, food, and truck price increases, the costs of raw materials and other early stage inputs drove the increase. Keep in mind, the PPI is more volatile than its cousin, the Consumer Price Index. The CPI for September will be released Thursday with expectations for an increase of 0.3% and ex food and energy plus 0.2%.

Stocks fell hard Monday on weak earnings and the continued stalemate in resolving the European financial crisis. This morning both stocks and bonds are trading relatively flat with the yield on the 10 year note slightly lower at 2.135%. Mortgage prices have improved another .125% to .25%.

Market commentary

In addition to a full economic calendar the markets will be contending with third quarter earnings announcements and the possible solution or non-solution to the European financial crisis.

The Federal Reserve reported this morning that U.S. Industrial Production rose 0.4% in September, while Capacity Utilization increased 0.1%. The positive numbers indicate the U.S. manufacturing sector is maintaining and managing to grow, however slight that growth may be.

From Europe, German Chancellor Merkel made it clear today that this weekend’s European Union summit will not provide a complete fix to the financial crisis. Her comments sparked a retreat in the Euro and European bank shares, while providing a lift to U.S. Treasury prices in a flight to safety.

The improvement in Treasury prices is spilling over into the mortgage market, so mortgage prices are .125% to .25% better than Friday.

Market commentary

The U.S. stock markets are shaking off the lowest reading for consumer confidence in 30 years, and instead focusing on the better than expected increase in retail sales. The Thomson Rueters/University of Michigan index of consumer sentiment fell to 57.5 in early October, while retail sales dwarfed expectations, climbing 1.1%.

In addition to the strong retail sales report, news from Europe is raising expectations a resolution of the financial crisis there may be close; but we have heard that story before.
Bond prices are lower/interest rates higher as investors continue to move away from the risk free trade. The yield on the 10 year note has risen to 2.25% this morning and mortgage prices are worse by .375%.

Market commentary

Initial jobless claims for the week ending October 8 came in at 404,000 versus the previous week’s 405,000, making twenty-five of the past twenty-seven weeks in which we have seen claims above the 400,000 mark.

Wednesday the U.S. Treasury auction of 10 year notes was an ugly affair that sent bond prices a little lower with the yield on the 10 year note closing at 2.24%. Today’s auction of 30 year bonds will be the final leg of this week’s auctions. Bond prices are improving today as U.S. stock markets are weak. JP Morgan Chase announced third quarter earnings 4% lower than this time last year, and its share prices are trading lower, dragging other financial stocks along for the ride. The yield on the 10 year note has fallen to 2.155% and prices for mortgages are improved by .125% to .25%.

The Minutes from the Fed’s September meeting, released yesterday, show that the Fed is increasingly concerned about economic growth. "The risks to the growth outlook…were significant and tilted to the downside." After discussing several options, it was agreed the Fed would begin selling shorter term Treasuries to purchase longer term Treasuries, also known as Operation Twist. This is what helped push the yield on the 10 year note to 1.74% just days after the announcement.

Market commentary

The main event of today’s economic calendar will be the September FOMC Minutes. This was the meeting at which Operation Twist was implemented, and the markets will be interested to see if any FOMC members were in favor of QE3, cutting interest on excess reserves, or putting in place a rate cap on Treasury yields.

Alcoa was the first company to release third quarter results and the announcement was disappointing. In spite of this U.S. stock markets are moving higher and bond prices are headed lower/interest rates higher.

From Europe we hear that Slovakia, which represents just 0.6% of the EU economy, still needs to approve the expansion of the EU bailout fund. Internal politics in this country have delayed the vote until later this week; however, Slovakia’s approval is required for the measure to be implemented.

Tuesday’s 3 year note auction was fairly well received and will be followed today by a 10 year note auction today. As of this writing the yield on the 10 year note has risen from 2.15% at the market close Tuesday, to 2.22%. Mortgage prices are worse by approximately .25%.

Market commentary

Stocks were up 330 points yesterday on hopes that French President Sarkozy and German Chancellor Merkel are finally getting serious about resolving the euro zone financial crisis. The two leaders vowed to offer a joint plan within the next few weeks to bolster European banks, and to do whatever it takes. They did not address how they will deal with Greece which is a separate, but connected, issue.

Watching CNBC this morning the question was asked, “How does Slovakia affect the global financial system”? The answer is, Slovakia is the last of the 17 euro zone countries to vote on expanding the European Financial Stability Fund, and if approved, all EU members would have voted in favor of expanding the fund to help contain the financial market stress.

The positive news coming out of Europe this weekend and again this morning is leading U.S. Treasury prices lower/interest rates higher, and later today, the U.S. Treasury will auction $33 billion of 3 year notes, which could put additional pressure on bonds. The yield on the 10 year note has risen to 2.14% this morning and mortgage prices are worse by approximately .25%.

Market commentary

Last week seemed to be a key reversal for both bond and stock markets. After reaching historically low levels, Treasury yields moved higher every day while stocks managed to close in positive territory. The yield on the 10 year note closed Friday at 2.09%, and remember, the U.S. bond market is closed today.

U.S. stock markets are open today, and stock futures are pointing to a sharply higher market open. News this weekend that Europe will be helping their largest banks recapitalize and expectations that third quarter earnings will be positive for U.S. companies are supporting the equity markets. If the bond market was open, I expect we would see interest rates moving higher and investors leave the safety of Treasuries and move into higher risk investments.

Although the bond market is closed, HSOA will post pricing and the HSOA lock desk will be open normal hours, closing at 4:00 PM, PT.

Market commentary

September’s employment reports were better than expected with total payrolls increasing 103,000 while private payrolls grew 137,000. There was also a revision of +57,000 to August’s abysmal +0 payroll report. The manufacturing sector lost 13,000 jobs, its second monthly drop and the government sector lost 34,000. The largest gain came from the service sector, +119,000 which includes the return to work of the 45,000 striking Verizon workers, which helped account for the zero growth in August. The unemployment rate held steady at 9.1%.

Treasuries yields were already climbing prior to the jobs data, and quickly moved higher on the news, bringing us to a full week where the Treasury market has worsened each day. The yield on the 10 year note currently stands at 2.08%. Recall two weeks ago, after the last Fed meeting, the yield on the 10 year note fell close to 1.70%.

The bond market is closed Monday, October 10, 2011; however, HSOA will be open for business and will be accepting locks normal hours.

Market commentary

Treasuries sold off again on Wednesday, and are lower again today, mostly due to the absence of the flight to quality. The non-manufacturing ISM report was better than expected and there were no new reports of financial distress out of Europe. Today we see a similar pattern. Weekly jobless claims rose slightly; once again above the 400,000 market, and news from Europe tells us the EU is moving to shore up the capital of ailing banks. So now bad news equals no flight to quality bid.

The yield on the 10 year note has pushed higher to 1.955% and mortgage bonds are worse in price by approximately .25%.

We end today’s commentary with a quote from Steve Jobs 2005 Commencement Address at Stanford University – "Your time is limited, so don"t waste it living someone else"s life. Don’t be trapped by dogma - which is living with the results of other people's thinking. Don't let the noise of other's opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”

Market commentary

ADP’s estimate of private sector created in September came in it at 91,000, slightly more than expected. According to ADP, small business is where job creation is occurring. Since the end of the recession, small business has added 633,000 jobs, medium firms have added 541,000, and large firms have cut 287,000. In other job related news, Challenger, Gray, and Christmas’ job cuts index rose 211% year over year for the month of September. This is the largest year over year increase in the index since the heart of the recession, and was driven by announcements from the Army and Bank of America.

The Institute for Supply Management reported its index for the non-manufacturing sectors of the U.S. economy fell to 53.0 from 53.3 in August. While this index remains in positive territory, the decline reflects the softness in economic conditions.

Fed Chairman Bernanke testified before Congress yesterday, justifying the aggressive role of the Fed by stating the “recovery is close to faltering” and that the U.S. economy is further away from full employment than price stability. His message was that the Fed was trying to spur the economy along but that fiscal policymakers (aka, the President and Congress) had to get involved also. Of course President Obama and Senator Durbin took on the challenge of job creation by attacking Bank of America for its debit card fee increase, the result of Senator Durbin’s legislation that limited the fees banks could charge to retailers for debit card transactions. Apparently the recent announcement by Bank of America that 30,000 layoffs were on the horizon, a cost cutting measure due to lower income, did not make it to Washington D.C.

For a third day in a row U.S. Treasuries are in decline. The yield on the ten year note has risen to 1.885% and mortgage bonds are worse in price by approximately .25%.

Market commentary

Monday, stocks opened the 4th quarter with their worst opening day performance since 1998. Everything seemed okay until mid-morning when bond prices began to run and stocks gave in to the uncertainty coming from Europe. The euro zone finance ministers did not approve the next round of bailout money for Greece, delaying the decision on the $10.7 billion payment until sometime after October 13.

Also helping the U.S. Treasury market was the Fed, which made their first "operation twist" purchases yesterday, buying over $2 billion in longer long maturities. The 30 year bond has rallied from 3.30% before the Fed announced operation twist to 2.76% this morning, although bonds have retreated as the day wears on. Mortgages are not performing well today as they are worse in by price by just over .375%.

Market commentary

The first of three big economic reports this week showed that manufacturing activity grew in September. The Institute for Supply Management reported its factory index rose to 51.6 from 50.6 in August. The steady decline in this index leading up to September had many worried the U.S. was falling into a double dip recession.

The remaining two reports on which the markets will focus are the ISM non-manufacturing, which will be released Wednesday, and the jobs data, which will be released Friday. Friday’s non-farm payroll report is expected to show 56,000 new jobs were added to the U.S. economy in September with the unemployment rate remaining steady at 9.1%.

Once again, the over-riding factor in the markets today comes from Europe as Greece is projected to now fall short of its 2012 goal of cutting its deficit to 6.5% of GDP. This puts in jeopardy a planned second international bailout and a growing risk Greece will default on a portion or all of its outstanding debt.

U.S. Treasury prices are higher aging this morning after some ugly stock sessions in Asia and Europe, and mortgage prices have improved by approximately .25%.

Market commentary

Bonds are improving again this morning on a report that personal income for the month of August fell 0.1%, and was revised down to 0.1% growth in July. This was the first outright decline in income since October 2009. Consumer spending, however, rose 0.2%, with the increase in spending the result of consumers dipping into savings, which is not a sustainable factor for economic growth.

Continuing with the consumer theme, the Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 59.4 this month from 55.7 in August.

On the business side of the economy, the Institute for Supply Management-Chicago reported its business barometer rose to 60.4 this month from 56.5 in August. A level of 50 is the dividing line between expansion and contraction, and we will see the national version of this data next week.

The positive news on consumer confidence and manufacturing has not been enough to offset the negative effect of the personal income report and the continuing saga coming from Europe. The yield on the 10 year note has fallen to 1.95% and mortgage prices have improved approximately .25%.

Market commentary

While trying to decide if today’s economic data is actually good news, or just “less bad” news we can report the following: Initial jobless claims for the week ending September 24 dropped from 428,000 to 391,000, the lowest number of claims since April, 2011. And Gross Domestic Product (GDP) for the 2nd quarter was revised slightly higher this morning from an annualized rate of 1.0% to 1.3%. Not exactly a stellar performance, but a step in the right direction.

On the European front, the German Parliament voted this morning to support expansion of the euro zone rescue fund. Recall this fund was established with the authority to buy bonds from the market, enable bank recapitalizations, and provide precautionary credit lines. The measure also increases Germany’s stake in the fund from €123 billion to €211 billion. All 17 member countries must approve of the plan, and 11 have already done so. If I were a German taxpayer I would be thrilled to increase my tax burden to bailout my less frugal brethern to the south.

U.S. Treasuries were unaffected by today’s data and news, with the yield on the 10 year note remaining above 2.00% at 2.015%. Prices for mortgages are worse by a few basis points.

Market commentary

Post last week’s Fed announcement the markets experienced 3 days of emotional, perhaps even a panic reaction as investors fled risk assets such as stocks, and dove into the relative safety of U.S. Treasuries. It seems after taking the weekend off, and receiving indications the Europeans may actually have the resolve to salvage the Euro, steadier nerves have replaced the panic. Investors, seeing cheaper stock prices, have piled in and sold Treasuries, pushing interest rates higher. The yield on the 10 year note hit a low of 1.74% last week and is now trading at 2.045%, and mortgage bonds have given back over 100 basis points in price.

This trend continues today, with investors pushing interest rates higher, even though stocks remain relatively flat.

Today’s Durable Goods report from the Commerce Department suggests some businesses are investing in capital equipment, as new orders for these items rose 1.1% after falling .02% in August. This data had little effect on the markets.

Market commentary

Bond prices suffered a significant setback and stocks put in a strong rally on Monday as the European Union seemed to finally be making progress in resolving its financial woes. The same story is the headline this morning; stocks are moving sharply higher and bonds struggle. The yield on the 10 year note is close to pushing above the 2.0% mark, with a current yield of 1.99%. In conjunction with the decline in Treasures, mortgage prices are worse by approximately .25%.

In terms of data, home values continue to sag as reported by the S&P/Case-Shiller index. The latest reading for this index reflects property values in the 20 cities measured declined 4.1% in the 12 months from July 2010.

Later today the U.S. Treasury will auction $35 billion of 2 year notes; the same maturity as the notes being sold by the Fed in their “operation twist” announced last week. This should be interesting to watch.

Market commentary

The Dow Jones Industrial Average suffered its worst performance since the throes of the financial crisis in 2008 last week, dropping 740 points or 6.4%. Sentiment soured over the week on the prospects of a weak U.S. economy and an unresolved crisis in Europe.

In today’s economic data the Commerce Department reported purchases of new houses in the U.S. declined in August to a six-month low as the biggest drop in prices in two years failed to lure buyers away from even less expensive distressed properties. Sales dropped 2.3% to a 295,000 annual pace, while the median price slumped 7.7% compared to August 2010.

The economic data calendar is full this week with data on the housing sector, consumer confidence, manufacturing activity and inflation, and the U.S. Treasury is also auctioning 2 year, 5 year and 7 year notes.

After last week’s volatility this morning is a yawner as we see stock slightly higher and bonds fading. The yield on the 10 year note has risen to 1.86% and mortgages are worse by approximately .25%.

Market commentary

Wednesday was all about new makers. Moody’s downgraded Bank of America, Citi, and Wells Fargo, a move that surprised the equity markets and began the negative sentiment in the stock market. The House of Representatives voted down a bill to continue funding the government past the fiscal year end of September 30, setting up another possible showdown and creating additional uncertainty in an already fragile market.

Finally, the Fed again went all-in, announcing an active “twist” policy and jumping back into the mortgage market. While some had thought that the Fed might just alter its reinvestment strategy, the Fed went further by announcing that it will sell $400 billion in Treasuries maturing in less than 3yrs and use the proceeds to purchase maturities from 6 years through 30 years. Those purchases will be allocated to 32% 6-8yr, 32% 8-10yr, 4% 10-20yr, 29% 20-30yr, and 3% TIPs. The biggest surprise of the FOMC’s announcement was that the Fed will reinvest mortgage and agency principal payments into mortgage securities. While the dollars that such a move will direct into mortgage securities will not be that significant (estimated at around $15 billion to $20 billion per month for nine months), the move does signal both support for the mortgage market as well as a desire to facilitate consumer refinancings.

The markets reacted violently on this news as stocks plummeted and U.S. Treasuries soared, a pattern that is repeating itself this morning. The yield on the 10 year note fell to 1.87% and is trading at 1.77% this morning; a record low! Mortgage bonds rallied as well, gaining over 1.0% on lower coupons, while compressing prices on higher coupons.

Market commentary

U.S. stocks and bonds are trading flat this morning as all await the results of the FOMC meeting at 2:15 p.m. ET. It does not appear that Chairman Bernanke will have a post-meeting press conference as had been originally expected. Some analysts have speculated that the Fed will announce $50 to $60 billion in monthly Treasury swaps (selling 1-to 5-year notes and buying 5- to 10-year notes) for a six-month period in what has been referred to as “operation twist.” This is generally what the market is now expecting, so anything smaller, larger or different could get a response from the markets. Stay tuned!

Market commentary

Housing starts in August fell from 601,000 to 571,000, more than double the expected declined. However, a bright spot appeared as building permits rose.

Last night Standard and Poor’s cut Italy’s rating from A+ to A using a similar rationale when S & P downgraded the U.S. It seems Italy’s political leadership is hesitant to tackle the challenges facing their country, much as the U.S. political leadership is.

The drama in Greece continues with another round of talks scheduled for today between Greek and EU officials. Hmmm, I wonder if Las Vegas is making odds on whether or not Greece will default on its debt.

After a nice rally Monday, bonds faded into the close and are lower again this morning. Mortgage prices are worse by approximately .25% from Monday’s mid-day price improvement.

Market commentary

Economic data is light this week and the main focus of the markets will be the two day Fed meeting. The consensus of Fed watchers expect an announcement that will include the purchase of medium term Treasury debt in an effort to force longer term interest rates lower. However, the bond market has already priced this in.

Between now and the Fed meeting Europe remains front and center, as EU finance ministers left their weekend meeting with no resolution to the debt crisis. The markets are bracing for the worst, which is a default by Greece on its debt. The lack of progress in the EU debt talks has U.S. stocks in a broad sell-off and a flight to safety in U.S. Treasuries. The yield on the 10 year note has once again fallen below 2.00%, currently trading at 1.965%, and mortgage prices have improved by .375% to .50% from Friday.

Market commentary

U.S. consumer sentiment, as measured by the Reuters/University of Michigan survey, inched higher from 55.7, the lowest level since 2008, to 57.8. The gauge of consumer expectations, however, floundered, coming in at 47.0, the lowest level since 1980. Clearly consumers are retrenching as poor economic data, concern about jobs, the lack of leadership coming from Washington D.C., and the continuing headlines of a pending financial crisis in Europe take their toll.

U.S. Treasuries sold off yesterday on stronger statements of support from Germany and France along with the announcement of coordinated central bank efforts to provide dollar liquidity to the euro zone banks. The European Central Bank announced the U.S. Federal Reserve, Bank of England, Bank of Japan, and Swiss National Bank will work with the ECB to provide three-month term dollar borrowing of unlimited quantity. In other words, another bailout of unlimited scope.

Mortgage prices are unchanged from the market close on Thursday.

Market commentary

In today’s early morning releases initial jobless claims rose 11,000 to 428,000 for the week ending September 10. With the four-week moving average is now up to 419,500, there are very few positive signs for the labor market out there right now which initial claims data reaffirm every week. Also released this morning, the New York Fed manufacturing index for its region dropped again from -7.7 to -8.8.

On the inflation front the August Consumer Price Index was also released this morning and showed a larger than expected increase in prices. Overall prices rose 0.4% month over month bringing the annualized pace of price growth to 3.8%. Excluding food and energy prices rose 0.2% putting the year over year core rate of inflation at 2.0%.

The last piece of data was the Fed’s Industrial production report for August which reflected an increase of 0.2% after increasing 0.9% in July.

For the most part today’s data is negative as the labor market remains in the doldrums, and excluding energy costs consumer prices are moving higher. This data was mostly ignored by the markets, though, as the news that the ECB, the Fed and other central banks around the world will cooperate to offer short term loans to European banks to prevent money markets from freezing. This news sponsored a rally in stock prices, especially financial shares, and an unwinding of the safe haven bid in U.S. Treasuries. The yield on the 10 year note is now at 2.07% and mortgage prices are worse again today by another .25%.

Market commentary

Producer prices were flat in August as costs for energy and autos dropped. Core prices, excluding food and energy, rose just 0.1%, so a bit of good news on the inflation front. With some less positive news, the Commerce Department reported this morning retail sales for August did not increase and they only rose 0.3% in July, less than the originally estimated 0.5%. Consumers are being overwhelmed by a loss of confidence, a flat jobs market, and weak earnings growth, among other headwinds.
A large portion of those headwinds continue to blow across from Europe with the constant deluge of potential defaults by various countries on their debt. Reuters reported this morning that U.S. banks are coming to the rescue of several of their European counterparts as EU banks saw funding from U.S. money market funds dry up. While the U.S. banks are providing secured funding at higher than market interest rates, I remain skeptical. Should the EU banks default who will provide the bailout funds? Assuming a similar 2008 scenario, I expect you and me, as U.S. taxpayers, in addition to our European taxpayer buddies.
The effect of today’s economic data and news on U.S. markets has been close to nil, with stocks and bonds relatively flat from the close on Tuesday. Mortgage prices have improved approximately .125%.

Market commentary

Monday had the beginnings of a horrible day for stocks as the European debt crisis seemed to reach a critical stage. A late day story that China was considering buying Italian debt gave stocks some legs and they ended the day higher. This morning we have continued rumors from Europe, however, U.S. markets seem unaffected with stock flat and treasuries giving back some of their flight to safety gains.

In front of this afternoon’s U.S. Treasury auction of 10 year notes the yield on the 10 year note has risen to 1.98% after briefly touching a low of 1.88% early Monday morning. Mortgage pricing is worse by approximately .25%.

Market commentary

With no U.S. economic releases this morning, Europe and the rumors of Greece defaulting on their debt are what is driving the market. U.S. stock markets are trading lower, treasuries are flat, however, mortgages are worse by .375% to .50%.

Later today the U.S. Treasury will auction $32 billion of 3 year notes, and the remainder of the week is heavy with economic data, including the Producer and Consumer price index, Retail Sales, Industrial Production and consumer confidence.

Market commentary

President Obama’s address to Congress, while rousing, proved to be little more than the trial balloons had suggested. Global and U.S. stock markets were disappointed in the lack of details, and there is not much different in this plan from the previous stimulus plan; lots of borrowed money going to support state and local governments, the long term unemployed, etc. Business leaders, analysts and many economists continue to state the obvious; the one thing that continues to be missing from the discussion is getting to a point of clarity on Dodd-Frank and "ObamaCare". It is the uncertainty as to what the final regulations will look like that makes business reluctant to hire workers and consumers reluctant to purchase a new home, a first home or to move up. As one analysis I read stated, “We don't need more monetary stimulus. We probably need less fiscal stimulus than most expect. What we need is clarity, and that appears not to be on the table for either side”.

As of this writing the DOW is lower by 230 points and bonds are flat from Thursday’s close. Mortgage prices have improved slightly from Thursday.

Market commentary

Initial jobless claims for the week ending September 3 unexpectedly rose from 412,000 to 414,000. This makes 21 of 22 weeks that the claims number has been above 400,000, and is clear indication unemployment in the U.S. will not decline anytime soon.

Speaking of jobs, President Obama is set to address some members of Congress tonight to present his much hyped jobs proposal. You will recall the markets tanked two weeks ago when German Chancellor Merkel and French President Sarkozy built up a similar speech that failed to deliver any new ideas. Given the partisan political atmosphere in Washington D.C., the markets will be looking for something that stands a chance of passing through both Chambers of Congress.

Fed Chairman Bernanke speaks at 10:30 A.M., PT today which speech is expected to give insight into the policy tools the members of the FOMC will discuss at their meeting later this month. At approximately the same time we will see the results of the U.S. Treasury’s 30 year bond auction.

The markets must be a bit tired from the volatility this week as both stocks and bonds are relatively flat to their respective closes on Wednesday.

Market commentary

No major data releases this morning to drive trading, however, U. S. stock markets are reversing Tuesday’s declines in a big way with the DOW higher by 180 points. As often happens when stocks rally bond prices are headed lower pushing interest rates higher.

Later today the Fed will release its Beige Book, a report of economic activity in the various Fed districts, and the U.S. Treasury will auction $12 billion of 10 year notes.

Market commentary

Positive news from on the non-manufacturing sector was not enough to rescue stocks this morning. The ISM non-manufacturing index rose to 53.3 in August, up from 52.7 in July and higher than the forecast drop to 51.0. The one sour note in the report was the drop in the employment index, which is consistent with the overall job situation in the U.S.

This report follow Friday’s dismal employment report and comes just two days prior to President Obama’s Thursday night jobs speech. Following this data U.S. stocks are down sharply in a broad sell-off. Treasury bonds are rallying, mostly on the long end with the price of the 30 year bond higher by over 1.00%, but the 10 year note is higher by only a few basis points, pushing the yield down to 1.96%.

This week marks another round of U.S. debt auctions beginning today with $32 billion of 3 year notes, followed Wednesday with $21 billion 10 year notes, and Thursday with $13 billion of 30 year bonds.

Market commentary

There were no nonfarm payrolls; or in other words, zero jobs, created in the month of August. The previous two month’s worth of payroll data was revised down 58,000 including a drop in July payrolls from 117,000 to 85,000. In the private sector, there were 17,000 jobs created in August versus 156,000 in July.

Treasury prices immediately rallied on the news, with the yield on the 10 year note falling to 2.04% from 2.17%. Given the weak jobs report the Fed may be inclined to implement some form of QE3, so any further improvement in Treasuries may be muted until the markets hear from the Fed. Mortgage prices have improved approximately .375%.

Market commentary

Treasury yields rose yesterday, with the 10 year note rising 10 bps from its intraday low yield of 2.14% up to 2.24% by the close. Pricing on mortgages kept pace with Treasuries, falling .375% to .50% by the close of trading, forcing lenders to reprice for the worse mid-day.

Economic data this morning reflects an economy that continues to weaken. The ISM manufacturing report did not dip below 50.0 as was expected in August, but did decline from 50.9 to 50.6, with the majority of the underlying components contracting.

Initial jobless claims remain above the 400,000 mark. For the week ending August 27 new claims were 409,000, and the four week moving average of claims rose from 408,500 to 410,300.

On the productivity front, nonfarm productivity dropped in the second quarter by 0.7%. This is a data point the Fed watches as weaker productivity implies higher costs to produce a product or service, or said another way, inflationary pressures. Unit labor costs rose from 2.2% to 3.3% for the quarter.

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.

Market commentary

Negative economic data has bonds in rally mode this morning pushing the yield on the 10 year note down to 2.85%. Mortgage prices are improving as well; however, we would be seeing more of a follow-through in mortgages if the potential downgrade of U.S. debt had not widened credit spreads.

This morning it was reported that 2nd quarter GDP came in short of expectations at 1.3%. This was not completely unexpected, but what came in as a surprise was the revision of the 1st quarter GPD to just 0.4% from 1.9%. That kind of revision is much unexpected. The 1st quarter was revised down to reflect a worse trade deficit, due to higher oil imports, and inventories, which add to GDP, were revised down. The drop in auto production, due to the Japanese disruption, caused a huge dip as well. Personal Consumption rose just 0.1%, well below the 0.8% anticipated, as the consumer reined in spending amid a tirade of economic negatives. In addition, higher cost figures pushed the Employment Cost Index up to 0.7% from 0.6%, while expectations were for 0.5%. All in all, this was a pretty negative report.

Following the weak GDP announcement, the Institute for Supply Management-Chicago Inc. said today its business barometer fell to 58.8 in July from 61.1 the prior month with the employment measure declining to 51.5 from 58.7, indicating less hiring.

And finally, the Thomson Reuters/University of Michigan final index of consumer sentiment fell to 63.7 from 71.5 in June, the weakest since March 2009, from 71.5 in June.

In summary, lots a negative economic data this morning has investors seeking the safety and liquity of the U.S. Treasury market in spite of the seeming impasse regarding any deficit reduction and increase in the debt ceiling.

Market commentary

On the data front weekly jobless claims fell below the 400,000 mark for the first time since early April. It will be nice to see the number continue to fall as higher employment will be the main driver of a recovery in housing. Regarding housing, the number of contracts to purchase previously owned U.S. home rose 2.4% in June as buyers tried to take advantage of lower prices and borrowing costs.

Wednesday’s 5 year note auction did not go as well as Tuesday’s 2 year auction and we saw bonds take a hit, especially mortgages which ended the day almost 50 basis points lower in price. This morning the bond market has recovered much of Wednesday’s losses, however, we still have the 7 year note auction scheduled for later today.

And of course, the main focus continues to be the drama surrounding an agreement on raising the U.S. borrowing capacity while trying to reign in uncontrolled spending. No deal is expected today, so bonds will most likely trade on the results of the 10 year note auction. If you need to lock your loan today, consider locking it early.

Market commentary

This morning we learned that durable goods orders for the month of June fell 2.1%, driven mostly by orders (or the lack thereof) for transportation equipment. Ex-transportation, orders rose but at a weak 0.1%. While this report is disappointing, it has not moved the markets which are firmly focused on the deficit/debt ceiling debate in Washington right now. Do not forget, however, the sovereign debt crisis in Europe remains, so if U.S. debt is downgraded where do investors go? The U.S. Treasury market is the largest and most liquid market in the world. In light of this, the Swiss franc and gold continue to make daily highs.

Later this morning the U.S. Treasury will auction 5 year notes, and this afternoon the Fed will release its Beige book, which will give us a region by region look at business activity in the U.S.

Bond prices are flat from the market close on Tuesday while stocks are decidedly lower.