Market Snapshot 8/29/2011

Not a good start to the week; treasuries and mortgage markets trading lower in price and higher yields, at 9:00 the 10 yr note -27/32 at 2.28% +9 bp, mortgage prices -9/32 (.28 bp) frm Friday's close. The global stock markets were better overnight and are propelling US stocks higher this morning. Last Friday Bernanke in his speech at Jackson Hole said he doesn't believe the US will enter another recession as the economy slowly improves. The Fed has no plans at the moment for another easing move, but he said the Fed will move if necessary. Meanwhile Bernanke turned US equity markets around on his economic outlook; the DJIA closed +134 Friday and at 9:00 this morning ahead of the open the DJIA +122.  

At 8:30 this morning July personal income and spending; income up 0.3%, June income revised to +0.2% frm +0.1%. Spending in July was a little better than 0.5% expected, up 0.8% and added a little more strength to the pre-open trading in the indexes. The July savings rate +5.0%, down slightly from +5.5% in June. The US savings rate has been strong for the past year; prior to the 2008 calamities US savings were under 1.0%; consumers unlike politicians understand the need to cut spending and increase savings.

At 10:00 NAR June pending home sales were expected down 1.3%; as reported sales fell 1.3%; yr/yr +14.4%. Pending sales are contracts signed but not yet closed, likely some of the contracts will not close. No immediate reaction to the report.

This week is employment week; Friday the August employment report will likely keep markets from substantial moves. Of course treasuries and mortgages will be impacted by trade in the stock market. Given the trading over the last week it is looking less likely the 10 yr note will break below 2.00% and that the lows in rates may have been achieved. To attract buying in treasuries that will drop the 10 yr note below 2.00% the economic outlook would have to revert to a recession view; Bernanke took some of that outlook out of the equation in his speech.

This Week's Economic Calendar;

        Today;

          8:30 am July personal income and spending (as reported, income up 0.3%, spending +0.8%)

          10:00 am June pending home sales (as reported -1.3%)

       Tuesday;

         9:00 am June Case/Shiller 20 city price index (-4.7%)

        10:00 am Aug consumer confidence index (52.0 frm 59.5)

      Wednesday;

        7:00 am weekly MBA mortgage applications

        8:15 am Aug ADP private jobs estimate (+100K)

        9:45 am Chicago purchasing mgrs index (53.0 frm 58.8)

        10:00 am July factory orders (+1.8%)

     Thursday;

        8:30 am weekly jobless claims (-10K to 407K)

                Q2 productivity (-0.5%)

                Q2 unit labor costs (+2.4%)

       10:00 am Aug ISM manufacturing index (48.5 frm 50.9)

                     July construction spending (0.0%)

     Friday;

       8:30 am Aug employment data (unemployed 9.1%, non-farm jobs +73K, non-farm private jobs +110K)

The DJIA opened +143, the 10 yr at 9:30 -24/32 at 2.27% +8 bp and mortgage prices -8/32 (.25 bp).

In Greece its stock market put in the best performance in the last 23 years on news that tow of their banks will merge, the merger supposedly will increase the ability of the merged banks to avoid defaulting. The strength in Greece fed through most European stock markets; doesn't take a lot these days to bring out bargain hunters after how badly markets have been beaten down. The Greek two year note rate is 46%, after the country was bailed out twice by European Union partners as it struggled to service its debt. Still no real progress from Europe on all of the sovereign debt problems; the ECB, the EU, the IMF, Germany and France can't get banks to write down their loans to Greece and the other four countries that can't pay their debt.