Market commentary

Today begins one of the most important weeks in recent memory for the financial markets as we have are scheduled to have historical mid-term elections, a Fed shifting its fight to the front of deflation, and a payroll report.
But first, today’s data from the Commerce Department showed consumer spending rose 0.2% in September, less than forecast, and incomes dropped for the first time in more than a year.
On a more positive note, manufacturing in the U.S. expanded more than forecast in October as the Institute for Supply Management’s factory index increased to 56.9, the highest since May.
Regarding the elections, the markets are expecting a Republican House, a Democratic Senate with less than a super-majority, and a tidal wave of Republican governorships. The markets, it seems, are eager for change in the political landscape and anything less than the above would disappoint equities and conceivably send bond prices higher (if it were not for the FOMC statement on Wednesday).
The market is expecting the FOMC to announce a second round of quantitative easing. Round two is expected to be $500 billion in size and include the purchase of Treasuries across the curve. If they surprise with something larger, this could send equities even higher and push bond yields lower.