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%.