Posts Tagged → Fed Funds Rate
January 2012 Economic Calendar
| Date | (GMT) | Event | Actual | Cons. | Previous |
| Jan 01 | 00:00 | New Year’s Day | |||
| Jan 03 | 15:00 | Construction Spending (MoM) | 1.2% | 0.5% | -0.2% |
| Jan 03 | 15:00 | ISM Manufacturing | 53.9 | 53.2 | 52.7 |
| Jan 03 | 15:00 | ISM Prices Paid | 47.5 | 47.9 | 45.0 |
| Jan 03 | 19:00 | FOMC Minutes | |||
| Jan 04 | 12:00 | MBA Mortgage Applications | -4.1% | 0.3% | |
| Jan 04 | 15:00 | Factory Orders (MoM) | 1.8% | 2.0% | -0.2% |
| Jan 04 | 21:00 | Total Vehicle Sales | 13.60M | 13.50M | 13.63M |
| Jan 05 | 13:15 | ADP Employment Change | 165K | 206K | |
| Jan 05 | 13:30 | Continuing Jobless Claims | 3.522M | 3.601M | |
| Jan 05 | 13:30 | Initial Jobless Claims | 375K | 381K | |
| Jan 05 | 15:00 | ISM Non-Manufacturing | 53 | 52 | |
| Jan 05 | 16:00 | EIA Crude Oil Stocks change | 3.899M | ||
| Jan 06 | 13:30 | Average Hourly Earnings (MoM) | 0.2% | -0.1% | |
| Jan 06 | 13:30 | Average Hourly Earnings (YoY) | 2.1% | 1.8% | |
| Jan 06 | 13:30 | Average Weekly Hours | 34.3 | 34.3 | |
| Jan 06 | 13:30 | Nonfarm Payrolls | 150K | 120K | |
| Jan 06 | 13:30 | Unemployment Rate | 8.7% | 8.6% | |
| Jan 09 | 20:00 | Consumer Credit Change | $7.65B | ||
| Jan 10 | 15:00 | IBD/TIPP Economic Optimism (MoM) | 42.8 | ||
| Jan 10 | 15:00 | Wholesale Inventories | 1.6% | ||
| Jan 11 | 12:00 | MBA Mortgage Applications | -4.1% | ||
| Jan 12 | 13:30 | Continuing Jobless Claims | |||
| Jan 12 | 13:30 | Initial Jobless Claims | 381K | ||
| Jan 12 | 13:30 | Retail Sales (MoM) | 0.2% | ||
| Jan 12 | 13:30 | Retail Sales ex Autos (MoM) | 0.2% | ||
| Jan 12 | 15:00 | Business Inventories | 0.8% | ||
| Jan 12 | 15:30 | EIA Crude Oil Stocks change | |||
| Jan 13 | 13:30 | Trade Balance | -$43.47B | ||
| Jan 14 | 13:55 | Reuters/Michigan Consumer Sentiment Index | 69.9 | ||
| Jan 16 | 00:00 | Martin L. King’s Birthday | |||
| Jan 17 | 13:30 | NY Empire State Manufacturing Index | 9.53 | ||
| Jan 18 | 12:00 | MBA Mortgage Applications | |||
| Jan 19 | 13:30 | Continuing Jobless Claims | |||
| Jan 19 | 15:30 | EIA Crude Oil Stocks change | |||
| Jan 25 | 12:00 | MBA Mortgage Applications | |||
| Jan 25 | 19:00 | FOMC Minutes | |||
| Jan 25 | 19:15 | Fed Interest Rate Decision | 0.25% | ||
| Jan 26 | 13:30 | Continuing Jobless Claims | |||
| Jan 26 | 15:30 | EIA Crude Oil Stocks change | |||
| Jan 31 | 14:00 | S&P/Case-Shiller Home Price Indices (YoY) | -3.4% |
Monday Update
Treasuries and mortgages opened weak this morning; over the week-end no real progress with the debt ceiling increase as political gamesmanship continues. Democrats and the Pres want debt ceiling increase large enough to avoid having to deal with it next year ahead of the elections, while Republicans are trying to get a plan that increases the ceiling but only enough to get through several months then back to the debate.
The impasse has boosted the chance Standard & Poor’s will lower the U.S. credit rating from AAA within three months to 50%, according to PIMCO, the largest bond managers in the world. Mohammad El Erian said in an e-mail last week. “In most likelihood, a last-minute political compromise will avoid a default but will leave the AAA rating extremely vulnerable,” …… “stock markets around the globe will look to price in a greater uncertainty premium on account of political squabbles in the world’s largest economy and the increasing risk that it may lose its sacred AAA rating.” Over the weekend there was a lot of concern that equity markets would fall hard frm Asia to Europe and in the US; the DJIA is opening weaker this morning but not nearly as bad as some were expecting.
The way the debating in Washington is proceeding it isn’t going to sit well with markets. The US interest rate markets are likely to begin factoring in a risk premium based on concerns that rating agencies may lower the US credit rating based on the reluctance of politicians to step up and make major decisions on increasing revenues and cutting spending. As it looks now what actually occurs will not satisfy rating agencies; at least that is the present fluid thinking. A rapidly moving target now with the deadline coming on rapidly making it questionable whether Congress can put it all together in time to avoid default.
No economic releases today; this week Treasury will auction $99B of notes. The Fed isn’t buying treasuries anymore but the auctions two weeks ago didn’t appear to be pressured as a result.
This Week’s Economic Calendar;
Tuesday;
9:00 am Case/Shiller May 20 city price index (-4.4%)
10:00 am July consumer confidence index (56.0 frm 58.5)
June new home sales (+0.4% to 320K annualized)
1:00 pm $35B 2 yr note auction
Wednesday;
7:00 am Weekly MBA mortgage applications
8:30 am June durable orders (+0.4%; ex transportation orders +0.5%)
1:00 pm $35B 5 yr note auction
2:00 pm Fed Beige Book
Thursday;
8:30 am weekly jobless clams (-3K to 415K; cont claims 3.688 mil frm 3.698 mil)
10:00 am June pending home sales (-3.0%; +8.2% in May)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am Q2 advance GDP report (+1.6% frm +1.9% in Q1)
Q2 employment cost index (+0.5%)
9:45 am July Chicago purchasing mangers index (58.0 frm 61.1)
9:55 am U. of Michigan consumer sentiment index (63.8 unch)
Gold this morning making another record high as concern over the US credit rating possibly being lowered by the rating agencies.
Asian stock markets fell today, Europe’s markets also lower; at 9:30 the DJIA opened -96; the 10 yr note -13/32 3.01% and mortgage prices -9/32 (.28 bp).
Equity markets didn’t open as badly as many were expecting with no debt ceiling deal in place but the indexes are slipping a little from the 9:30 open, as they do fall the bond market is finding support. Although interest rates are higher this morning and prices lower on mortgages, if the stock market continues to slide as the day rolls on the bond market will likely improve. Conversely, any improvement in equity markets will push yields higher and prices lower. Technically the bond and mortgage markets are still not throwing off bearish reads but any more selling and the short term outlook will turn bearish. On the outlook for lower rates, we do not expect rates will fall much on any rallies. The 10 yr note has put in a double bottom on the yield chart, not a good sign. If the 10 yr note yield closes above 3.05% the next target would be 3.25% then 3.40%; mortgage rates will follow.
Thursday Trivia
Treasuries and mortgages doing better again this morning, the stock indexes in pre-market trade were better. Weekly jobless claims at 8:30 were a little softer than expected but generally in line; +1K to 427K, last week’s claims were revised from 422K to 426K. Continuing claims were down 71K to 3.676 mil. Treasuries were better prior to the claims and increased slightly after the release; by 9:00 however the 10 yr note backed off to unchanged and mortgage prices that were +3/32 at 8:00 were down 4/32 (.12 bp) on the session.
Also at 8:30 the April US trade deficit was expected at -$48.8B, good news, the monthly deficit was -$43.69B. Good news but does it imply the US economy is weaker than thought with less imports? More likely the decline is a result of Japan’s problems with the earthquakes and tsunami that hindered auto part exports. Imports dropped 0.4 percent to $219.2 billion from $220.2 billion in March. Demand for foreign-made automobiles and parts dropped by $2.82 billion to $19.1 billion, and crude oil imports fell by $2.42 billion as prices rose.
The ECB met and held interest rates unchanged; markets were expecting the bank to leave rates unchanged, no direct reaction of consequence.
The White House is said to be considering lowering or eliminating payroll taxes for businesses hiring new employees. It is in the planning stage, if actually proposed it will likely get bi-partisan support as Republicans have been pushing for more help for businesses.
Will there be another easing move from the Fed? As the economic outlook weakens the prospect is more in play in the minds of analysts. Not real sure what another Fed easing move will accomplish but with Congress and the Administration seeming to be paralyzed the Fed is seen as the only game in town. QE 2 didn’t help the economy as is obvious now, lower interest rates won’t help much. The problems in the economy are structural; consumers unwilling to spend much, gasoline prices and food prices continuing to increase, the housing sector being left out to dry; another easing move by the Fed won’t help cure those problems.
OPEC refused to increase output in their meeting yesterday; this morning Congress and the Administration are making comments that the US should open the strategic oil reserve to keep crude from increasing. The reserve has 727 million barrels in it; it would take a week or so once a decision to release oil to reach markets. Crude oil at 9:00 this morning up $1.00 at $101.74.
The last of this week’s auctions at 1:00 this afternoon, $13B of 30 yr bonds will be sold. Yesterday’s 10 yr auction met with good demand, today’s auction should also go well.
While the bond and mortgage markets remain strong with the prospect for lower rates still in tact; the markets presently are somewhat overbought in the near term, all momentum oscillators we use are in overbought levels.
Tuesday Trivia
At 8:30 April housing starts were worse than expected, down 10.6% to 523K units annualized with forecasts up 2.8%; March starts were revised higher, up 12.9%. April single family starts -5.1%. April building permits expected down 0.7% fell 4.0%. We don’t have a lot to add to the report in that it continues to slide, as long as housing does not show any recovery there is little anyone should expect in the way of economic improvement. We are amazed, and even somewhat shocked that there is very little outward attention to the crisis in Washington; possibly because there is not much that can be done except to wait it out. Interest rates are not the problem; inventory levels are and that can’t be changed quickly. Tight underwriting, low appraisals, banks unwilling or unable to make deals with investors willing to buy properties but at prices banks won’t yet accept.
More not so good news at 9:15; April industrial production was expected up 0.4%, it was unchanged; March production revised frm 0.8% to +0.7%. April manufacturing production fell 0.4%, the first decline in manufacturing since June 2010. April factory usage expected at 77.7% fell to 76.9%, March factory use originally reported at 77.4% was revised to 77.0%.
This is only Tuesday but each economic release so far has been weaker than analysts and economists were estimating. Yesterday the Fed’s NY manufacturing report a lot weaker than thought and prices pd for materials jumped. Today three data points also weaker. Commodity prices continue to fall as the economic outlook deteriorates; gold, crude oil, silver all lower this morning being pushed down as the economic outlook worsens. Yesterday the GDP outlook for this year was revised from +3.3% to +2.8%, the second revision lower and likely won’t be the last. A double dip economic recession? Not yet willing to buy that but there will be increasing talk about it along with renewed use of the word stagflation.
The DJIA at 9:30 opened down 80, the 10 yr note at 9:30 at 3.12% -3 bp and mortgage prices +.22 bp frm yesterday’s close.
In Europe the situation isn’t much better; inflation moving higher in England. Consumer prices rose 4.5% in April after a 4% increase in March, data today showed. The median forecast of 32 economists in a Bloomberg News survey was 4.1%. Core inflation quickened to the fastest in at least 14 years. In Germany investor confidence declined for a third month in May as faster inflation threatened to curb consumer spending and Europe’s sovereign-debt crisis worsened.
The weak economic data this morning has finally pushed the key 10 yr note through its resistance at 3.14% fueling the outlook for more declines in mortgage rates and US treasuries as money is moving to safety and away from risk trades. With most commodity prices falling recently inflation fears have lessened for now. Crude oil now down about $8.00 frm highs two weeks ago, gold off $90.00/oz frm its highs. The stock market is seen by Wall Street as just in a corrective pattern, we submit it is much more than just a correction—-more an adjustment that prices had exceeded future economic reality.
Can the 10 yr treasury hold below 3.14% as it is now into the close today? Likely it will be dictated by how the spastic stock market trades through the session. The key equity indexes are weaker now but recent activity has been choppy, still a multitude of bulls out there.
Monday Money News and The Week to Come
Interest rate markets started a little soft but generally hanging around unchanged with the stock market looking like a softer open at 9:30. At 9:00 the DJIA traded -36 after declining 100.25 on Friday. At 8:30 the May NY Empire State manufacturing index, it was expected at 18.0 frm 21.7, as reported it fell to 11.88. The prices pd component increased to 69.89 frm 57.69, some concern on the increase as markets continue to watch anything that might suggest inflation is increasing. The new orders component was 17.19 frm 22.34, the employment index did increase, to 24.73 frm 23.08. Overall a weaker than expected report but didn’t generate any noticeable reaction in the bond and mortgage markets. (any index reading over zero is considered expansion)
At 9:30 the DJIA opened -39, the 10 yr note unchanged and mortgage prices -1/32 (.03 bp).
At 10:00 the May NAHB housing market index, expected unchanged at 16, as reported it was unchanged. 16 has been the weak outlook for 6 out of the past 7 months with 15 being what is considered the pivotal level.
By now most are aware of the arrest of International Monetary Fund chief Dominique Strauss-Kahn in NY on charges of rape, criminal confinement, and a criminal sex act. Yet another scandal, this time the head of the IMF and a potential candidate for the Presidency of France. The arrest comes when the IMF is scheduled to begin talks about Greece’s debt problems. The meeting will take place as officials discuss increasing a 110 billion-euro ($155B) loan package to Greece amid concerns the country may be unable to finance its debt next year. While a juicy story, and likely to lead to his resignation, the incident hasn’t caused much reaction in any markets here or in Europe. Scandals these days, from insider trading, to inappropriate behaviors are unfortunately becoming commonplace; sad but true.
This Week’s Economic Calendar:
Today;
8:30 am May NY Empire St manufacturing index (as reported 11.88 frm 21.70)
10:00 am NAHB May housing mkt index ( expected unchanged at 16, as reported
Tuesday;
8:30 am April housing starts and permits (starts +2.8%, permits -0.7%)
9:15 am April Industrial production (+0.5%)
April capacity utilization (77.7% frm 77.4% in Mar)
Wednesday;
7:00 am weekly mortgage applications
2:00 pm FOMC minutes 4/27 meeting
Thursday;
8:30 am weekly jobless claims (-16K to 420K; con’t claims 3.713 mil frm 3.756 mil)
10:00 am April existing home sales (+2.3% to 5.22 mil annualized)
May Philadelphia Fed business index (17.5 frm 18.5 in Apr)
Apr leading economic indicators (0.0% frm 0.4% in Mar)
Crude oil appears to be settling down in a range of $3.00; not running higher but not falling either. Gasoline prices likely won’t decline much now until after Memorial Day as demand should stay high and oil companies take advantage as they do every late May. With crude prices moderating, as long as it continues the outlook for consumer spending will improve; but in our opinion unless gasoline prices fall $0.75/gal consumers will not increase their spending much.
The 10 yr note, the segment of the curve that directs mortgage markets, has for 7 days tested what is increasingly become a key level at 3.14% and each day it has failed to break through. On the other side, there is no appreciable selling. The 10 yr and mortgage rates have settled in a 4/32 range (.12 bp) for over a week now. Nice to have stable markets; however it won’t last much longer. After testing and being rejected for 7 trading sessions, if the 10 breaks and closes below 3.14% we would expect a move down to 3.00% taking 30 yr mortgage rates down 10 to 12 basis points in rate. The other outlook; if the 10 closes above 3.20% we can expect additional increase in rates.
Happy Cinco De Mayo!
Treasuries and mortgage markets better again this morning with the stock market weaker. Crude oil, gold, silver and other commodities lower as the commodity bubble continues to burst. At 8:30 more bad news for the economy, weekly jobless claims were expected to have declined 29K they increased 43K to 474K, the biggest increase since Aug 2010. Continuing claims increased to 3.733 mil frm 3.659 mil. The 4 wk average now at 431,250; 400K is considered pivotal by many analysts, not sure why other than its an easy rounded number. A huge shock to markets with many still professing economic improvement; that view has been shaken badly in the past week and is turning markets around quickly. Although the headline hit hard there were some seasonal factors that may have exaggerated the increase; a spring break holiday in New York, a new emergency benefits program in Oregon and auto shutdowns caused by the disaster in Japan were the main reasons for the surge.
Q1 preliminary productivity increased 1.6% a little better than expected (+1.0%) but weaker than Q4 2010 at 2.6%. Q1 unit labor costs were up 1.0% a tad higher than thought (+0.8%), costs in Q4 were down 0.6%.
Crude oil last Friday traded at $114.00, this morning $106.00; gold last Friday $1560.00, now $1504.00, silver, copper and other commodities all reversing after months of increased prices. Markets seem to go from one bubble to the next, the commodity bubble being the latest and now bursting.
The Bank of England kept its benchmark interest rate at a record low (0.5%) as signs the recovery is losing momentum kept a majority of policy makers focused on stimulating growth during the government’s fiscal squeeze.
Jean-Claude Trichet, ECB chief left interest rates unchanged after recent increases to fight off inflation. He said the bank will monitor upside inflation risks “very closely,” suggesting it may wait until after June to raise interest rates again. “It is essential that recent price developments do not give rise to broad-based inflationary pressures,” Trichet commented after leaving rates unchanged at 1.25%. Central banks in the Philippines and Malaysia today raised interest rates, and India this week increased its borrowing costs for the ninth time since March 2010. Rates in China, may rise further after its central bank said yesterday that taming inflation is its top priority.
The bond and mortgage markets are better this morning but have already slipped back from their best levels at 9:00 after the data at 8:30. The 10 hit 3.17% at 9:00, at 9:30 3.19%; mortgage prices at 9:00 +8/32 (.25 bp), at 9:30 +4/32 (.12 bp). The technical’s are in overbought levels on the momentum oscillators and relative strength index, the potential of some consolidation exists now. At 9:30 the DJIA opened -51, as long as the indexes are weaker the bond and mortgage markets should hold gains; any recovery in equities with bond mkt overbought will likely pressure prices in mortgages. The wider perspective remains positive, however at present low yields we wonder how much lower rates can fall.
Nothing left today in terms of scheduled news; the rest of the day will be guided by the equity market trading. Tomorrow the April employment report which now is expected to show less job growth than was expected earlier this week after the ADP report yesterday and the increase in weekly claims last week and this week although today’s claims are not part of the data gathered for tomorrow’s report.
Tuesday Trivia
A better start this morning after a generally unchanged session yesterday. Markets working on the after impact (if any) frm the news Osama is dead. Yesterday the equity markets made an attempt to rally on relief but ended the session slightly weaker, the bond and mortgage markets saw no safe haven moves based on the view that Islamic terrorists would take revenge in the US with attacks. Crude oil ended lower as did gold; it appears that killing Bin Laden has had little impact. Had we gotten him seven yrs ago it may have had a different impact. After 10 yrs markets and the economy have moved on. High kudos to the Seals and intel agencies, and the President but markets are non-plused.
This morning crude oil started down $1.50 after falling $0.80 yesterday; gold yesterday down about $11.00 early this morning down another $13.00. Stock indexes early pointed to a weaker open. The 10 yr note at 9:00 was hitting open its key resistance at 3.25%.
Markets, whether interest rates, equities, oil or gold working on two issues. On one hand the economic outlook in the US is being ratcheted lower from early estimates this year, on the other concerns that terrorists will launch retaliatory attacks on the US Bin Laden had always encouraged hitting oil targets to cripple Europe and the US. So far there has been nothing coming from any terrorist cell and Bin Laden’s family is advocating no retaliatory moves.
The Johnson Redbook retail sales report released this morning showed sales were up 5.5% from this week last year. The Goldman Sachs retail sales were up just 2.8% yr/yr. Easter buying is distorting both reports with Easter much later this yr than last.
At 9:30 the DJIA opened -8, the 10 yr note +5/32 at 3.26% -2 bp and mortgage prices up 3/32 (.09 bp).
At 10:00 March factory orders, expected up 1.9%, jumped 3.0% and Feb revised from -0.1% to +0.7%; ex transportation orders up 2.6%. Mar durable goods orders were revised to +2.9% frm +2.5%. Treasuries and mortgages slipped a couple of 32nds on the news.
So far markets have not been unusually disturbed one way or the other over the Bin Laden news. Unless there is an unexpected event attention will turn back to domestic issues; Friday is employment with non-farm private jobs expected to have increased by 200K with unemployment unchanged at 8.8%. Tim Geithner said yesterday he can keep the government from shutting down until August 2nd using what treasury always has in the past, accounting moves. With more time can Congress and the Administration find common ground on cutting spending and likely increase the debt ceiling?
No noticeable moves into treasuries on safety concerns after “The Killing”; no reaction in the equity markets either. In commodities gold is falling back but so far it isn’t anything more than what could be expected after the recent spike; crude oil backing off on weaker economic forecasts and no outward fear of any additional disruptions in supply. Over $4.00 demand will decline for gasoline.
The 10 yr note, driver for mortgages is at its resistance at 3.25%, with employment on Friday rate markets may hold here or back up a little. Rates have fallen substantially over the past month, to expect that to continue employment will have to be weaker and equity markets suffer further selling.
Tuesday Trivia
US rate markets slightly better this morning but not much; the early trade in stock indexes were pointing to a better open on UBS earnings. The Fed begins its FOMC meeting today concluding tomorrow with the short policy statement at 12:30 then Bernanke’s awaited press conference at 2:15.
At 9:00 the Case/Shiller Feb home price index; on the 20 city measurement prices fell 3.3% yr/yr and on the 10 city metro prices fell 2.6% yr/yr. No reaction to the data as usual, there isn’t any improvement in the housing markets with prices continuing to fall and consumers seeing little compelling reason to buy or sell. Housing was the prime driver for the US economy since WW II until four years ago, now there seems to be little interest from Washington to directly address the issue.
At 9:30 the DJIA opened +16, the 10 yr note +4/32 and mortgage prices at 9:30 +.12 bp.
At 10:00 April consumer confidence from the Conference Board, expected at 64.4 frm 63.4 in March, was better at 65.4 frm March revision up to 63.8 frm 63.4. The present situation measurement at 39.6 frm 37.5 the highest since Nov 2008; 12 month expectations 82.6 frm 81.3 and the 1 yr inflation outlook index to 6.3 frm 6.7. Overall a better consumer outlook boosted equity indexes a little but the bond market had little initial reaction.
The only significant focus point now is on tomorrow’s FOMC statement and what Bernanke will say at his press conference in answering what we hope will be the tough questions. The general conclusion now is that the Fed will complete its QE 2 $600B treasury purchases by the end of June. What comes next is what markets are seeking; most bond market participants and stock market enthusiasts are expecting Bernanke will keep interest rates low for at least the rest of the year and possibly longer. Bernanke and some other Fed officials have repeatedly defined the economy as in “modest recovery” and still fragile. As long as the Fed (Bernanke) see it that way the Fed will do whatever is necessary to keep rates low. As long as that outlook holds stock markets will continue to improve, low rates don’t have much positive impact on consumers (maybe lower car loans), mortgage rates are low but that isn’t motivating anyone. All about driving the dollar lower and pushing investments into equity markets.
Thursday the first look at Q1 GDP is expected at 1.5% to 2.3% growth; a lot weaker than was thought just six weeks ago. Increasing numbers of analysts are currently lowering growth expectations for Q2. The Fed isn’t about to yank its support with the economic outlook not as rosy as most were expecting a short time ago. Two weeks ago markets were all a buzz fearing inflation as commodity prices increase, today focus has changed to how much more help the Fed will provide. Unlikely we will have another QE 3 but the Fed has other ways to pump money into the bond markets; it may decide to reinvest the interest and principal payments from its bond holdings in treasuries.
The bond market isn’t expecting US rates will increase when the Fed ends QE 2 at the end of June. Since last Nov the Fed has purchased about $550B of treasuries while Treasury has issued $825B of notes and bonds, when the Fed ends its QE as is generally expected traders apparently believe markets will step up and fill the short-fall.
Treasury auction $35B of 2 yr notes at 1:00 this afternoon, expectations are for good bidding.
Technically the bond and mortgage markets remain bullish; that said we will continue to stand down from buying treasuries at least until we hear from Bernanke tomorrow
Monday Update
Treasuries and mortgage markets opened better this morning in light trading ahead of this week’s Treasury auctions and the FOMC meeting on Wednesday. Equity market pre-open trade were up a little, about unchanged from fair value pointing to a flat open. Crude oil continues to increase, up $1.00 at $113.30 at 9:00 am, gold also higher again today (+$10.00 at 9:00 am).
At 9:30 the DJIA opened -17, 10 yr note +2/32 and mortgage prices +4/32 (.12 bp).
At 10:00 the only data point today, March new home sales expected up 10.7%, increased 11.1% to 300K annualized and up from 270K in Feb frm 250K originally reported. Better but not much; the median sales price $213,800.00% down 4.9% frm Mar 2010, based on sales there is a 7.3 month supply down from 8.2 months in Feb.
The major focus this week is the FOMC meeting on Wednesday. Always a key focus for the financial markets, this week even more so as for the first time in history the Fed chief will hold a 45 minute press conference after the meeting. Normally the FOMC releases a short policy statement after the meeting at 2:15 pm; this meeting will conclude with the statement at 12:30 then at 2:15 Bernanke will hold his news conference allowing reporters to ask questions. The Fed is trying to increase certainty and add stability in markets removing much of the speculation about what the Fed really means. Unlikely that his press conference will add more clarity, but at least he will try.
Treasury will auction $99B of 2′s, 5′s and 7 yr notes Tuesday through Thursday, selling the 5 yr note sandwiched between the Fed’s policy statement at 12:30 and Bernanke’s press conference at 2:15 on Wednesday. Economic data has new home sales today (see above), weekly claims on Thursday along with the first look at Q1 GDP also on Thursday. This week also has a huge number of Q1 earnings reports that will set the tone for the equity markets. So far earnings overall have generally beaten Street estimates. Technically the bond and mortgage markets are looking good as inflation worries fade and the dollar declining. We don’t expect much change in mortgage prices until Wednesday’s FOMC meeting.
This Week’s Economic Calendar:
Tuesday;
9:00 am Case/Shiller Feb home price index (-3.2% 20 city)
10:00 am April consumer confidence index (64.4 frm 63.4 in March)
1:00 pm $35b 2 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 AM March durable goods orders (+1.8%, ex transportation +1.2%)
12:30 pm FOMC policy statement
1:00 pm $35B 5 yr note auction
2:15 pm Bernanke press conference
Thursday;
8:30 am Q1 advance GDP report (+1.7%)
weekly jobless claims (-13K to 390K, continuing claims 3.69 mil frm 3.695 mil)
10:00 am NAR pending home sales for Mar (+1.7%)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am March personal income and spending (income +0.4%, spending +0.5%)
Q1 employment cost index (+0.5%, Q4 +0.4%)
9:45 am Apr Chicago purchasing mgrs index (68.0 frm 70.6 in Mar)
9:55 am U. of Michigan consumer sentiment index (69.6 unch frm mid-month)
Much of the world markets are closed today, likely will influence trade in US markets today. The bond and mortgage markets sitting relatively unchanged so far this morning. Technically the bond and mortgage markets slightly bullish but any selling could change the technicals quickly. Debate continues about the value of treasuries and the present rates. Recent comments from Bill Gross at PIMCO that returns at present rates are not worth investing, while most dealers continue to prime the pump that bonds are a good investment. Generally we do not expect the bellwether 10 yr note to move above 4.00% this year, which is the general consensus. Gross’s criticism of present low rates, and his comment recently that PIMCO was at one point short US rate markets upset many that said it was anti-American. “I could join the dealers and say the 10-year’s not going to go to 4 percent, so what am I left with?” Gross said…….“I’m left with an under-yielding, less-than-inflation security. I have better choices. As a firm we’re not going to put up with it.”
Thrusday Trivia
A little better start today in the rate markets while the stock indexes early were pointing to another better open at 9:30. More earnings reports late yesterday coming better than expected. At 8:30 weekly jobless claims were widely expected to have declined 22K after increasing 27K the prior week; claims were down 13K to 403K, continuing claims declined to 3.695 mil frm 3.702 mil the week before. The 4 wk average on claims at 399K frm 396.7K. Claims remain elevated showing little progress recently after falling in Feb and Jan. A week ago the NFIB reported small business optimism, after improving since last Oct, fell to the level prior to last Oct; small businesses are the engine for employment, without hiring in that sector unemployment is unlikely to decline much.
Most Q1 earnings reports are hitting better than expected, driving the equity markets higher but having little if any impact in the employment sector. No job growth, no improvement in the housing sector, $4.00+ gas prices, food prices increasing—-it doesn’t matter as long as investors large and small see their net worth increase. The US approaching bankruptcy with the political outlook less than favorable that a serious budget reduction plan will emerge—-who cares? S&P lowering US debt to negative from stable has generally been pushed to the background and dismissed; the consensus among traders, investors, politicians, analysts and economists is still denial, the US will never lose its AAA credit rating. After all this is the strongest economy and nation in the world—–or is it? Republicans don’t want to increase taxes, Democrats don’t want to cut spending; if both parties don’t get close to being on the same page soon we will wake on day with interest rates much higher, the dollar (already falling hard) will not be the reserve currency of the world and the US will be a follower and not a leader. Hard to imagine, but we are closer than most think and many won’t admit outwardly.
At 9:30 the DJIA opened +16, 10 yr note +3/32 and mortgage prices +2/32 (.06 bp).
At 10:00 April Philly Fed business index, expected to have declined to 32.9 frm 43.4, as reported the index plunged to 18.5; the new orders component 18.8 frm 40.3, employment 12.3 frm 18.2 and prices pd for materials at 57.1 frm 63.8. The decline in the index took the stock market down initially and boosted prices in the rate markets. The decline in the overall index supports the growing concern that the economy isn’t as strong as had been thought as recently as two weeks ago. (any index read over zeros is considered expansion)
March leading economic indicators at 10:00 expected +0.2% jumped 0.4%.
The FHFA housing price index for Feb declined 1.6%, no surprise there.
This is the end of the week with market closed tomorrow. Next week Treasury will auction an estimated $99B of notes and the FOMC meeting on Wednesday. For the first time the Fed will release its policy statement at 12:30 then at 2:15 Fed chief will hold a news conference allowing questions and opening more details about the meeting and the intent of the generally short policy statement. Given recent events and debates and posturing over the coming budget battle the Fed will have the opportunity to say its piece in a manner unlike we haven’t had prior to this meeting. The auctions and the FOMC meeting may keep markets steady at present levels.