After waiting for two weeks for "The Speech" President Obama delivered one of his best oratory events since the Keynote speech at the Democratic convention six years ago. It was a good speech in the sense he laid out the political problems infecting Washington, yet it has been met with yawn by markets. The stock indexes early this morning slightly weaker and the bond market also a little weaker; no real big moves here or globally. “The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy,” he chided Republicans and to some extent his own party to get moving on initiatives to cut unemployment and imp[rove the economic outlook. The president demanded six times that lawmakers act “right away” his plan.
His plan totals out to be about $450B of payroll tax cuts, tax incentives for businesses that hire, infrastructure construction, funds to hire back more teachers. Some of the plan will be acceptable to the opposition, some won't. Tax cuts for small business and payroll tax cuts for workers are likely to get done; other elements won't see the light of day. Tax cuts account for more than half the dollar value of the president’s latest plan to turn the economy around, and administration officials said they believe that will have the greatest appeal to Republicans in Congress. The President said all of his $450B plan will be completely paid for----in the future; business as usual out of Washington. Most all of his plan is a temporary fix, nothing in it was permanent. The first stimulus, $825B, failed to increase jobs and stabilize the economy; this one is about the same in terms of being temporary. Businesses can't plan or increase hiring based on temporary stimuli. It is unlikely the President's plan will accomplish the intended goals but Congress has to get behind some of it otherwise it is another $450B wasted.
Early this morning the rate markets were weak; the 10 yr at 8:00 down 12/32 to 2.02% and mortgages off 6/32 (.18 bp) frm yesterday's closes. By 9:00 the bond and mortgage markets moved back to unchanged on the day; the stock indexes weakening as the open got closer. At 9:30 the DJIA opened -114, 10 yr +3/32 at 1.96% -2/32; mtgs +6/32.
Out of Pakistan there have been reports that three terrorists were to fly to the US, get into autos or trucks and blow up bridges and tunnels in remembrance of 9/11 10 yrs ago. US security has found nothing to corroborate the story but there has been an increase in security precautions.
US equity markets opened weaker this morning following weak markets in Europe. The bond market struggled early but by 9:30 crawled back to unchanged, mortgage prices at 9:00 -6/32 (.18 bp), by 9:30 +6/32 (.18 bp). Obama so far hasn't gotten market support for his plan; Europe is trumping most everything now with renewed concerns that Greece will not be able to meet the conditions set out for more bailout funds to avoid default. If Greece were to default it would increase fears that Italy, Spain, Portugal and Ireland may suffer the same fate. G-7 meeting in France today again trying to find an out for Europe's debt crisis.
Treasuries next week will meet auctions; Monday $32b of 3 yr notes, Tuesday $21B of 10 yr notes and Wednesday $13B of 30 yr bonds.
The rest of the day will be based on how stock markets perform----nothing unusual about that these days.
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