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%.