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.