Sioux Falls Area
March 12th, 2012
A lot of blood, sweat and tears have been shed over the past several months about the possibility that Greece would default on its economic obligations, but it looks like this upcoming part of the bailout will go through. There was no hoopla; the markets didn’t go crazy. The take-away from this troubling ordeal is that Treasury yields have remained low throughout.
Last week began with news that China, which boasts the world’s second largest economy, lowered its target for annual economic growth last Monday, sending stocks down in many countries around the globe, including the U.S. Investors did not move to Treasuries; the 10-year note yield, which moves inversely to price, edged up by 1 basis point.
The economic reports were mixed and had little bearing on the market. The February ISM index on the service sector rose more than expected, hitting 57.3% — up from 56.8% the previous month. This caused only light selling of Treasuries. Factory orders in January fell 1.0%, which was less than the predicted 1.5% decline. But orders were down substantially from December’s 1.4% increase.
Later in the session Treasuries were hurt by talk of large amounts of corporate debt being sold that pay higher interest rates than the close-to-rock-bottom yields Treasuries offer. At close the 10-year yield had risen to 2.00%.
Treasuries recovered Tuesday as global concerns about China’s flagging economy and Greece’s funding problems sent stocks plummeting. Also on the list of worries is the declining state of economic growth in the European Union and the eurozone countries. The 10-year Treasury closed at 1.94%.
Wednesday was another up-and-down day. Stocks fell early, allowing Treasuries to maintain Tuesday’s yields. But then ADP, the payroll giant, said that 216,000 jobs were added to private sector payrolls in February, sending stock prices and bond yields up. Later the Wall Street Journal released an article stating that the Fed is considering a new bond program to ward off inflation. Bonds liked the anti-inflation move, and yields slid.
The only economic report showed 4thquarter manufacturing production and costs on the rise. Production costs jumped 0.9%, while unit labor costs rose 2.8%. These are unsettling numbers when compared to final 3rdquarter data: production up 2.3% and labor costs -2.5%. When labor costs rise faster than production costs, that’s a sign of inflation. The 10-year closed at 1.96%.
A positive outlook for Greece overshadowed a disappointing report on first-time jobless claims for the week ended March 3. Applications for benefits jumped by 8,000 to a higher-than-expected 362,000. With investors finding no reason to buy Treasuries as stock prices climbed, the 10-year yield rose four basis points to close at 2.01%.
The February employment report took center stage Friday morning, as 213,000 jobs were added to nonfarm payrolls. Although this was 30,000 fewer than in January, stocks posted decent gains, and Treasuries sold. It was also noted that about 20% of the jobs added were temporary, but employers anticipate many will turn into full-time positions as the economy improves. The unemployment rate held at 8.3%.
The U.S. trade deficit caught the attention of the markets. The trade gap in January, which came in at -$52.6 billion, was $2 billion higher than in December. It was the largest deficit since October 2008. These numbers could negatively impact 1stquarter GDP. Wholesale inventories in January rose 0.4%, which was down substantially from the 1.1% increase the previous month.
The Mortgage Bankers Association released another mixed report on mortgage applications for the week ended March 3. Applications to purchase rose 2.1% while refis dipped 2.0%.
This week could be a little tough on Treasuries, as analysts expect upbeat reports on several economic indicators. But then, analysts have been known to be wrong. There are no reports due Monday, but retail sales for February are out early Tuesday, and they usually influence the markets. Sales are forecast to rise 1.1%, which would dwarf the 0.4% January increase. Excluding autos, sales should rise 0.7% — the same as the previous month. If on target, retail sales should boost Wall Street and encourage selling in Treasuries.
January business inventories are forecast to increase by 0.5%, just slightly higher than December’s 0.4% rise. This report is generally ignored by the markets.
Wednesday is almost a non-day as far as reports go. Import and export prices indices for February are due but generally don’t affect the markets. Import prices, however, are expected to rise 0.5% from the previous 0.3% increase. There are no export price forecasts.
Four reports are due Thursday, and any one (or all of them) could influence trading. First-time jobless claims for the week ended March 10 are due. Claims have been holding in the 350,000 range for the past several weeks, so any numbers substantially above or below that would likely affect Treasuries.
February’s producer price index, which looks for inflation at the wholesale level, follows. It is expected to rise 0.5%, which is much higher than the 0.3% increase the previous month. The core rate, which is the one the Fed looks at, is expected to decline 0.2% from 0.4%; that should calm worriers.
Two manufacturing indices from February are also on tap, and both are expected to rise, which could put selling pressure on Treasuries. The Philly Fed index looks at manufacturing conditions in the mid-Atlantic area, and it is expected to climb to 14.5 from 10.2 — a considerable move. The NY Empire State index should hit 22.0, up from 19.5. Manufacturing has not snapped back as hoped; for the past few months, however, these indices have been moving up slowly, but steadily.
Friday there are three more reports before the markets close for the week. First out and always important is the consumer price index, which keeps tabs on inflation at the retail level. Analysts believe that it will have risen 0.5% in February, which is quite an increase from the previous 0.2% reading. The core rate, which eliminates volatile food and energy prices, should show a 0.2% increase, which would be good news when compared to January’s 0.4% increase. A rise in the CPI, however, could worry bond investors because inflation erodes the value of longer-term fixed-rate assts.
Industrial production in February is expected to move up 0.3%, which is a good number compared to the 0.0% reading in January. But it also means that manufacturing may be recovering, which could lessen the need for safe-haven buying. Capacity utilization should hold at 78.7. The preliminary Thomson Reuters/University of Michigan consumer sentiment survey for March is predicted to increase to 76.0 from the February final of 75.3. Although not a big jump, it is yet another indication that perhaps things are moving in a more positive direction. That could send 10-year yields up.
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March 5th, 2012
Europe’s economic problems jumped back into the news last Monday, as did concerns about high gas prices, which could slow domestic economic growth. The German parliament is set to vote on its contribution for Greece’s second bailout, which is not a done deal. In addition, the G20 won’t increase funding for the IMF until the eurozone nations do more to help themselves. They want more rescue funds to keep the eurozone debt crisis from spreading.
These concerns opened the door for investors who want to avoid uncertainty, so they bought bonds. The 10-year note yield, which moves in the opposite direction of price, fell six basis points to close at 1.92%.
Pending home sales in January rose 2%, which was its best gain since April 2010. Pending sales are also up 8% from one year ago. Although this report generally does not affect the markets, it is yet another indication that recovery in the housing market continues to inch ahead.
Tuesday the Conference Board released a way-better-than-expected consumer confidence survey. The index soared to 70.8 in February from the previous 61.5 reading. Analysts expected 63.5. Normally, those numbers would push stock prices up and cause heavy selling in bonds, but not this time.
The seemingly good news was countered by a 4.0% drop in durable goods orders in January — the biggest one-month decline in three years. Orders rose 3.2% in December, and were expected to drop by only 1.3% this time around. Some chalked up the poor numbers to the expiration of the tax credit. Excluding transportation, orders fell 3.2%.
The S&P Case-Shiller housing price index, which surveys home prices in the 20 largest U.S. cities, fell 4.0% in the 4thquarter to levels not seen since mid-2002. This was the fifth annual loss in prices and the biggest single loss since mid-2008.
Stocks were heartened by a small dip in gasoline prices before the markets closed, which sent the Dow and S&P to their highest levels since 2008. This put slight downward pressure on the 10-year note. The yield edged up to 1.93%.
Wednesday was busier than expected. Fed Chairman Ben Bernanke testified before Congress and hinted that there would not be a third round of quantitative easing, i.e., QE3. Disappointed investors sold, pushing the 10-year yield up by six basis points. He also said higher gas prices could reduce consumer spending and fire up inflation, which erodes the value of fixed-rate investments. The Chairman added that he anticipates slow growth in housing and doesn’t think unemployment will drop much lower this year. There was good news on inflation, which is expected to hold between 1.4% and 1.8%. This is below the Fed’s 2% maximum.
An upward revision on 4thquarter GDP also affected bonds. It came in at a higher-than-expected 3.0%, up from 2.8%. Commercial construction, consumer spending and fewer imports were largely responsible for the increase. In addition, the Chicago PMI index of February manufacturing conditions beat projections, jumping to 64.0 from 60.2.
And finally, the Fed’s Beige Book, which looks at economic growth in the nation’s 12 federal districts, reported that home sales and banking conditions improved across the country, with New York being the single holdout. Manufacturing and nonfinancial services showed moderate growth, while consumer spending was positive. Prices held in check, and there was no sign of wage pressure.
After big gains on Tuesday, the three major stock indices took a substantial hit, with the Dow again falling below 13,000. The 10-year closed at 1.99%.
A number of economic reports came in stronger than expected on Thursday, pushing the yield on the 10-year note up. First-time jobless claims fell to 351,000 for the week ended Feb. 25. Personal income and personal spending in January were also on the rise. Income increased by 0.3% and spending rose 0.2%, which was an improvement over the 0.0% reading for December.
Strong car sales in February, which could result in the auto industry’s best month in four years, and a 4.7% increase in retailers’ same-store sales, also rallied stocks. Financials led the charge, and kept investors away from bonds.
Two reports disappointed, but not enough to encourage buying in bonds. Construction spending in January dipped 1.0% and the ISM index on February manufacturing conditions fell to 52.4, when analysts expected 54.7. Any number above 50 indicates sector expansion, but this number has been edging down for the past four months.
When the closing bell rang, stocks had maintained some of their gains and so did Treasury yields, with the 10-year note rising to 2.04%, its first close above 2.0% since Feb. 21.
There was no economic news released Friday, so it appeared that Wall Street indulged in a little profit taking. And it looks like some of that money headed for Treasuries, as prices rose and yields fell.
Some news from Europe was promising. Twenty-five of the 27 countries in the European Union signed a fiscal compact requiring stricter monetary discipline, which will hopefully avoid future economic crises. The Czech Republic and United Kingdom held out. The jury is still out on Greece receiving money for its second bailout because loans from private creditors are not yet a done deal. March 9 is the deadline. A couple of weak economic reports from Spain and Germany also encouraged safe-haven buying in U.S. Treasuries.
When the markets closed, the yield on the 10-year note had fallen below 2.0%, to 1.97%.
Mortgage applications were mixed during the week ended Feb. 24. Purchase apps rose 0.9%, while refis fell 2.2%.
This week features a number of indicators, but none as important as Friday’s February employment report.
Monday begins with the ISM index on the service sector in February. It is expected to fall to 55.0 from 56.8, which is a fairly sharp drop. This indicator does not move the markets like the manufacturing index sometimes does, even though it employs a huge percentage of the labor force.
No reports are on tap for Tuesday, but on Wednesday ADP, the huge payroll company, releases the number of people added to private sector payrolls in February. This information can often move the markets. If the ADP number is high or low, the markets generally move on the news. No estimates are available.
The other report scheduled is 4thquarter productivity and costs. It is unlikely to rattle the markets because analysts expect little change. Productivity could edge down to 0.6% from the previous 0.7% reading. Labor costs, however, are expected to rise 1.2%, the same as in the 3rdquarter.
Thursday opens with the first-time unemployment report for the week ended March 3. Claims have been holding anywhere from 350,000 to 360,000. Should they rise or fall significantly, Treasuries would likely move accordingly. The other report on tap comes from Challenger, Gray and Christmas, an outsource firm. In January it reported that employers said job cuts could rise as high as 38.9%. No advance numbers are out for February.
Friday’s employment report could disappoint. After months of big additions to nonfarm payrolls, economists expect only 208,000 people will have been added to the working force. Even though the number is the lowest since November 2011, the number of unemployed should remain below the key 400,000 mark. Generally, if the report comes in as expected the markets’ responses will be minimal. It’s when the data are far above or below the predicted outcome that Treasury yields move.
The final two reports are on the U.S. trade deficit and wholesale inventories — both from January. The trade deficit is expected to edge up to $49 billion, which is just a hair more than the previous $48.8 billion. There are no estimates on inventories, which rose 1.0% in December. Neither of these indicators are market movers. Their chances of being ignored are even higher when they are followed by the employment report.
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February 27th, 2012
The curtain closed on Act 2 of the Greek tragedy entitled “Will Greece Default?” The final act focuses on Greece’s ability to get financing from the private sector. This must be accomplished before any bailout money is released.
The bailout package as approved last Monday was presented to the Institute of International Finance, representing private investors. The IFF director said his target is 95% approval, but he fears a number of investors will not sign off on the deal. Should this happen, it would be back to the drawing board for the bailout package, and Greece would stand on the brink of a disorderly default.
Stocks jumped early Tuesday morning on encouraging news regarding the bailout, with the Dow Jones passing the 13,000 mark for the first time in four years. The 10-year Treasury note yield, which moves inversely to price, rose to its highest level in two months. But with no economic reports released to provide a motive for buying stocks, the Dow slid prior to the closing bell, short of 13,000. The yield on the 10-year edged down to 2.04%.
Existing home sales in January improved on several levels. Wednesday’s report saw sales climb to an annual rate of 4.57 million units from a revised 4.38 million units in December, with the catalysts being rock-bottom mortgage rates and low home prices. The median home price fell 2% to $154,700, the lowest price in more than 10 years, due to the fact that 35% of all home sales were distressed properties. However, inventories fell to a six-month supply of 2.3 million homes — down 20% from one year ago.
In spite of that report, stocks remained in negative territory as continuing concerns about Greece were the main influence on Wall Street. Others sat on the sidelines, content with the big run-up in stock prices over the first seven weeks of the year. Some investors headed to U.S. Treasuries, pushing the yield down to 2.00%, its lowest close in six days.
Thursday’s report on first-time jobless claims for the week ended Feb. 18 remained at 351,000. Any number below the 400,000 mark indicates growth in the job market. So far this year, claims have come in below 400,000 in all but two weeks. The four-week average hit its lowest level since March 2008. Stocks edged up on the news, while Treasuries lost some support. Treasuries are also being challenged by a flood of corporate bonds that pay higher interest rates than government bonds. Separately, the Federal Housing Financial Agency reported that home prices rose 0.7% in December versus a 1.9% increase the previous month.
Greece didn’t hog the morning headlines, so the markets continued to watch and wait. In the afternoon an auction of 7-year Treasury notes showed strong demand, which gave a lift to other government offerings. The 10-year note closed at 1.98%.
Two economic reports were released Friday morning, but neither had the power to impact the markets. New home sales in January beat forecasts, rising to an annual rate of 321,000 units. December sales were also revised upward by 6%. In addition, inventories fell for the 11thstraight month to a record low of 151,000 units. The median price edged upward to $217.000.
The final February consumer sentiment survey from Thomson Reuters/University of Michigan also exceeded expectations, rising to 75.3 when 73 was expected. Normally this survey affects both stocks and bonds, but neither showed much interest.
At close on Friday, the yield on the 10-year note again closed at 1.98%.
Mortgage applications moved in opposite directions again during the week ended Feb. 17. The Mortgage Bankers Association reported that applications to purchase fell 2.9% from the previous week, while refis surged 4.8%.
Ten economic reports are due this week, with nine of them falling between Tuesday and Thursday. A few market movers are included in the mix. On Monday the pending home sales report for January is due. There are no estimates available, but they fell 3.5% in December. With the sales surge in January, that number could increase.
The big report Tuesday will be consumer confidence for February. It is expected to rise by more than two points (63.3 from 61.1). Should that happen, it would likely discourage investors from buying Treasuries.
Durable goods orders in January are expected to decline by 0.8% after rising 3.0% the previous month. That would be a substantial decline and could spark buying in Treasuries. What we don’t know is if the estimates were made before or after Boeing scored it largest order ever.
The final report is the Case-Shiller index on December home prices in the nation’s 20 largest cities. Prices fell 1.3% in November, but this survey usually doesn’t weigh on trading.
On Wednesday the 1strevision on 4thquarter GDP will be released. It initially rose to 2.8%. Economists are calling for a decline to 2.7%, which shouldn’t be enough to stir the markets. If it changes two percentage points or more either way there would likely be movement in the markets. The Chicago PMI index on manufacturing conditions in February could be a yawner. It is predicted to fall to 60.0 from 60.2, which would not likely stir up trading.
There’s a full slate on Thursday, beginning with first-time jobless claims for the week ended Feb. 25. There has been no change over the past two weeks, so a moderate move in either direction could impact Treasuries.
That will be followed by personal income/personal spending in January. Income should rise 0.3% versus a 0.5% gain in December, while spending should increase by 0.5% — much better than 0.0% the previous month. This report could slow investing in Treasuries, as it would be a sign of potential economic growth. The core rate, which looks at inflation, is forecast to rise 0.2%, the same as in December.
The ISM index on nationwide manufacturing conditions in February is expected to rise to 54.5 from 54.1, which could also slow buying in Treasuries. Expectations do not favor bonds, but the economic news regarding jobless claims will likely steer the direction of the markets.
The final report of the day and the week is construction spending in January. It should increase 0.4%, but that would be down substantially from December’s 1.5% gain. Either way, this report generally does not impact trading.
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February 6th, 2012
Word that Greece did not come up with a resolution regarding its debt crisis sank stock markets around the world on Monday, with financials taking the biggest hit. Greece is looking to private sector creditors to fund its bailout, but so far no bites.
U.S. Treasury securities, however, benefited big time as investors sought a safe haven for their cash. The benchmark 10-year note yield, which moves in the opposite direction of price, fell to 1.83% early in the session but closed at 1.84%. Stocks recovered most of their early losses as Wall Street became hopeful that the European Union leaders gathering for a summit will provide encouraging news.
The report on personal income and spending for December had little impact, even though income rose sharply. It jumped a better-than-expected 0.5% from 0.1% the previous month, while consumer spending was unchanged from November’s 0.1% increase. The PCE (personal consumption expenditures), a major inflation gauge, rose by an expected 0.1%.
On Tuesday the Dow dropped by more than 100 points at opening due to weak economic reports and news that Greece again did not yet come to an agreement with possible creditors regarding its debt. The news kept buying steady in the Treasury markets.
The first report showed that home prices are still falling, according to the S&P/Case-Shiller index on November house prices. Prices declined in 19 of the largest 20 U.S. cities surveyed (Phoenix dodged the bullet) by 3.7% versus a 3.4% drop in October. That was followed by two additional declines. The Chicago PMI index on manufacturing conditions in January dropped to 60.2 from 62.2, while consumer confidence plunged to 61.0 from 64.8 — a major disappointment.
The final report of the day was the 4thquarter employment cost index (ECI), which edged up to 0.4% from 0.3% in the 3rdquarter. The title is almost self-explanatory, as it charts total compensation by industry, ownership and occupation. It is watched for trends.
When the markets closed the Dow showed a 20-point loss, while the yield on the 10-year note dropped four basis points to finish at 1.80%.
February began on a positive note, as financial and tech stocks rose due to Facebook’s pending IPO. Wall Street is hoping when this happens it will push the markets in a positive direction.
Stocks rose early due to upbeat manufacturing data from countries around the globe. U.S. data, however, were a disappointment. The ISM index on January manufacturing conditions rose to 54.1 from 53.1, but analysts predicted an increase to 55.0, which made the actual gain less than acceptable.
ADP, the payroll company, said it added 170,000 jobs to private payrolls in January, which was far below the 212,000 added in December. This was also regarded as a negative regarding Friday’s January employment report.
Construction spending in December offered good news. It rose 1.5% from November’s drastically downwardly revised 0.4% increase. Originally, it showed as a 1.2% increase.
Stocks held gains throughout the session, discouraging buying in U.S. Treasuries. At close, the yield on the 10-year note hit 1.85%, up from the previous 1.80% reading.
Mixed news released Thursday morning provided little incentive for the markets to move. True, first-time jobless claims for the week ended Jan.28 fell to 367,000, down 12,000 from the previous week. That was far fewer than the 375,000 claims analysts expected.
Countering that news, however, was Fed Chief Ben Bernanke’s testimony before Congress. As he previously admitted, economic recovery has made some upward progress, but added that the pace of recovery is “agonizingly slow.” This, he believes, leaves economic recovery in the U.S. “vulnerable to shocks,” including those coming from overseas. Bernanke also indicated, as he has before, that the Fed will take further steps to aid economic recovery as needed. Most analysts believe that could include QE3.
That testimony stirred buying in Treasuries, sending yields down. They got a further push downward when Challenger, Gray and Christmas, an international outsource firm, announced that planned job cuts in December totaled 53,000 — the most since September.
Preliminary reports on 4thquarter productivity rose 0.7%, down from the 4thquarter final of 1.9%. Unit labor costs, however, jumped 1.2% from the previous -2.1% reading. The markets appeared to ignore the information.
Friday morning Treasuries took a severe beating after the far-better-than-expected January employment report was released. A whopping 243,000 jobs were added to nonfarm payrolls, dropping the unemployment rate to 8.3% — its fifth straight decline. These jobs were spread across many categories, from manufacturing to retail to factories.
Household surveys conducted by the U.S. Census Bureau suggest that hiring was probably stronger than the employment report showed.
Nonfarm payrolls were forecast to have added 155,000 to 200,000 jobs and the unemployment rate was expected to hold at 8.5%. The Dow Jones soared by more than 150 points, closing at a four-year high. The yield on the 10-year note also rose sharply, surging 12 basis points to 1.95%.
Two additional reports were released, but it is difficult to measure their impact due to the spike in employment. The ISM index on the service sector jumped to 56.8 from an upwardly revised 53.0, which is a significant increase. Separately, factory orders in December rose 1.1%. The previous month rose by an upwardly revised 2.2%.
Mortgage applications fell during the week ended January 27. The Mortgage Bankers Association said purchase apps were down 1.7%, while refis fell 3.6%.
This week is “economic indicators light.” There is nothing on the docket until Thursday, when first-time jobless claims for the week ended Feb.4 are released. Last week they fell considerably, but it isn’t clear yet whether it was volatility rearing its head or the way it will be as we move through 2012.
Wholesale inventories for December are also on tap. Briefing.com, which follows the markets closely and makes forecasts, rates this indicator as D- in importance. It doesn’t reflect anything regarding the consumer, so it is largely ignored. Those inventories rose 0.1% in November, but no current forecasts are available.
Friday closes with the preliminary survey on consumer sentiment for February. Released by Thomson Reuters/University of Michigan, this can affect the markets because consumer sentiment is believed to have strong ties to consumer spending. If consumers feel confident, they spend money. If they feel things aren’t going well, they shut their wallets. In January the index closed at 75 — the fifth straight increase. No estimates are available for this release.
The U.S. trade balance for December is also due and it is expected to widen a bit. Economists predict the trade gap will hit $48.1 billion, up from the previous $47.8 billion. Unless there is an extenuating circumstance, however, the markets ignore this report.
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January 30th, 2012
Greece is the word again. Ongoing talks regarding Greece’s debt crisis have thus far failed to solve the problem, and time is running out. Greece needs bailout funds from the European Union and the International Money Fund by March 20. This is when Greece’s payment of 14 billion euros (approximately $18 billion in U.S. dollars) comes due. The ongoing drama that reignited Monday put investors on edge, and stocks as well as bonds lost value. The yield on the 10-year note rose 4 bps to 2.07%; yields and prices, of course, move in opposite directions.
Tuesday was another day of wait and see. There was no economic news to influence trading and no announcements from Europe to tilt the scales one way or the other. The markets didn’t move much, and many economists believe Treasury yields will remain low for the foreseeable future. The 10-year note closed at 2.06%.
The Federal Open Market Committee (FOMC) confirmed that outlook after its meeting on Wednesday. Chairman Ben Bernanke said that although the economy is improving it has a long way to go. To aid an economic rebound he said the fed funds rate will remain at the historic low of 0%-0.25% until late 2014 — approximately 15 months longer than was originally proposed.
The committee also noted that: the unemployment rate should end the year between 8.2% and 8.5% (it was at an unrevised 8.5% in December 2011); the GDP should come in between 2.2% and 2.7% for 2012; the inflation target for this year is 2.0% and the door is still open on providing additional stimulus via QE3, if necessary.
The thinking behind these moves is to provide consumers with lower interest rates on big ticket items such as automobiles, mortgage rates and student loans. This would also affect credit cards that base their rates on “rate + prime.” The prime rate, currently at 3.25%, follows the fed funds rate, either up or down.
Wall Street liked the news, and the Dow closed at its highest level since May. Bond traders liked it also, as the yield on the 10-year Treasury note dropped 13 basis points to 1.85% on early word that the fed funds rate would hold until the end of 2014. It closed at 2.01%.
Other releases, which were totally ignored, said the Federal Housing Finance Agency house price index for November rose 1.0%. December pending home sales, however, fell 3.5% after spiking by 7.3% in November.
Thursday was a different story. Most of the economic news was negative, sending stocks prices and the 10-year yield down.
First-time jobless claims for the week ended Jan. 21 halted their trend downward.
Claims rose by 21,000 to 377,000, just slightly above the forecast of 375,000. New home sales in December were another matter, however. They slid 2.2% to an annual rate of 307,000 when analysts were expecting something closer to 325,000 units. Year-over-year sales dove 6.2% to a record low annual rate of 302,000 units, while the median price fell 12.8% to $210,000.
Durable goods orders, expensive items expected to last three or more years, rose 3%. Excluding autos, orders were up 2%. And finally, the leading economic indicators rose 0.4% when a 7% hike was expected.
News from Europe was minimal, as Greek officials continue to talk to private sector creditors with the hope of reducing Greece’s debt. As long as they continue to talk, hope exists. But now Portugal has joined the list of endangered countries that will now have to be watched.
The economic news pushed the 10-year yield down to 1.93% at closing.
On Friday the much-anticipated report on 4thquarter GDP was met with disappointment. Although the economy grew at a 2.8% clip (up from a 3rdquarter reading of 1.8%), it was lower than analysts had predicted. Any results that come in below expectations are generally regarded as bad news.
One of the major concerns was high inventories. Although they add to GDP, consumption growth was weak. Consumers have to spend in order to move the economy forward. As a result, stocks took a tumble, but the yield on the 10-year note was unchanged.
The final report, the January consumer sentiment survey compiled by Thomson Reuters/University of Michigan, rose to 75 from 74. This was the fifth straight month of upward movement. This survey usually impacts the markets, but on Friday Treasuries held steady until the final few minutes before closing. The benchmark 10-year yield closed at 1.90%. It fell 17 basis points during the week.
Mortgage applications fell during the week ended Jan. 20, according to the Mortgage Bankers Association. Purchase apps were down 5.4%, while applications to refinance were off by 5.2%.
This week is loaded with reports, which could lead to volatility, or not. It usually depends on whether the results exceed expectations or miss, and by how much.
Only one report is due Monday, but it ramps up from there. Personal spending and income for December offer only one change. Spending is expected to increase 0.1%, the same as in November. The core rate, which is an important inflation indicator, is expected to do the same. Income, however, could increase by 0.4%, according to analysts. That’s a big jump from the previous 0.1% reading, but it shouldn’t be a big market mover.
The 4thquarter employment cost index is expected to increase to 0.5% from the 3rdquarter 0.3% move. This generally doesn’t impact the markets, but consumer confidence for January does. It is predicted to rise to 68.0 from December’s 64.5.
This is a big move that could impact Treasuries. Higher confidence is believed to encourage spending, which in turn grows the economy. The report could discourage investors from buying bonds.
Also due is the Chicago PMI index on January manufacturing conditions. It’s expected to drop to 61.0 from the previous 62.5, which could be favorable for bonds. The final report is the S&P Case-Shiller November housing price index for the 20 largest U.S. cities. There are no estimates available, but it’s a good bet prices will go down.
Wednesday morning the ISM index on nationwide manufacturing conditions in January is predicted to increase to 54.5 from 53.9. Although that’s not a big move, any increase in manufacturing is a good sign — especially when the other two indicators are not usually regarded as significant.
Construction spending in December should increase 0.2%, which is far below the previous 1.2% — but an increase nevertheless.
Finally, ADP, the payroll company, should release the number of jobs it added to nonfarm payrolls in January. This report is anticipated because many believe it is an indicator of jobs added on Friday’s January employment report. A high number generally causes selling in Treasuries, but no estimate has been released.
First-time jobless claims for the week ended Jan. 21 are expected to climb to 375,000 from the previous 2008 low of 352,000. If claims rise by 23,000, that would probably increase buying in Treasuries, as they have been declining for the past several weeks.
The day’s final report is 4thquarter productivity and costs.
Productivity is expected to drop to -0.2% versus a 3rdquarter gain of 2.3%. Costs, however, should rise to -0.1% from -2.5%. Rising costs and lower productivity sometimes hint of inflation, which might put downward pressure on Treasuries.
Friday is the big one. The January employment report is expected to show 105,000 jobs added to nonfarm payrolls. That’s only a hair more than half of the 200,000 jobs added in December. It is far below the 250,000 jobs per month that economists say need to be added in order to lower the unemployment rate to a workable level.
The two reports released after that will get little attention. The ISM index on the service sector in January should increase to 53.5 from 52.6. No estimates are available for December factory orders, but they did rise 1.8% in November.
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January 17th, 2012
There was little action in the markets Monday. The beginning of 4thquarter corporate earnings season began after the closing bell. These quarterly reports can lead to volatility in the stock indices but they generally don’t impact U.S. Treasuries.
As has been true for months, Europe’s debt problems continue to be the primary movers of U.S. stocks and bonds. It was reported that the German chancellor and the French president said they are continuing work on a proposed pact that will require stronger budgetary restraints on eurozone countries. It could be signed this month and go into effect in March — emphasis on “could.”
The benchmark 10-year Treasury note yield, which moves in the opposite direction of price, was unchanged at 1.96%.
Stocks rose early Tuesday due to good corporate quarterly reports, more encouraging comments from Europe regarding the debt crisis and strength in the financial sector.
The only economic news showed wholesale inventories in November rose by a less-than-expected 0.1%. Even though it was a huge decline from October’s 1.2% increase, this indicator has little bearing on the markets. The 10-year note yield edged up to 1.97% at close.
Stock prices waffled Wednesday morning due to (what else?) concerns about Europe’s debt problems. This left investors with only one place to stash their money — U.S. Treasuries. The yield on the 10-year note fell to 1.93%.
The Fed’s beige book, which looks at economic conditions in the nation’s 12 federal districts, was released in the afternoon. It showed the economy expanded moderately in all districts, led by strong December retail sales. Real estate, however, was down across the board.
The yield on the 10-year note fell again in the wake of a strong auction of the benchmark Treasury. This was the first time ever that the government sold a 10-year note with a yield below 2.0%. The yield fell to 1.90% by the time the market closed.
Successful bond auctions in Europe, held early Thursday morning, indicated that the eurozone economy might be taking baby steps toward recovery. Pre-market data suggested a surge in stock prices. But poor U.S. retail sales in December and an increase of 24,000 first-time jobless claims for the week ended Jan. 7 pulled stocks into negative territory. The yield on the 10-year note edged up.
Retail sales in December rose a mere 0.1% from a revised 0.4% increase in November. Online sales fell 0.4%. Retail sales excluding autos fell 0.2%. This turned out to be not the happiest of holidays for merchants. Sales, however, were up 4.1% from one year ago.
First-time claims almost hit the key 400,000 mark again, rising to 399,000. The Labor Department admits that there is a great deal of volatility due to seasonal hiring but said the post-holiday surge in claims should smooth out by month’s end. Separately, business inventories in November rose by a weaker-than-expected 0.3% versus a 0.8% increase the previous month. The inventory-to-sales ratio held at 1-to-27.
Before the markets closed, strong demand for bonds and bills from Spain and Italy bolstered confidence not only in the new leadership of those countries but in the belief that they will not default. However, we are only two weeks into the New Year and there are many auctions to come. The more positive look at the European situation slowed buying in U.S. Treasuries and pushed the 10-year yield up to 1.93% at close.
The European situation didn’t look so rosy Friday morning. ”Good sources” said that Standard & Poor’s could lower the credit ratings of several European countries, excluding Germany. Topping the list of possibilities are France (almost a sure thing) and Austria. Investors sold stocks and piled into Treasuries.
An unexpected increase in consumer sentiment for the first half of January, as reported by Thomson Reuters/University of Michigan, didn’t slow the buying of Treasuries. The index rose to 74.0 from 69.9 due to an improved labor market, lower gas prices and stock market gains. This indicator is used to get a handle on consumer spending.
The other two reports, the U.S. trade balance for November and the import/export price indices for December, had no impact on trading. The 10-year again closed at 1.85%.
Mortgage applications climbed during the week ended January 6, according to the Mortgage Bankers Association. Purchase applications were up 8.1% and refis rose 3.3%.
This week is the third four-day week we’ve had in the last four weeks, due to Martin Luther King Jr. Day. Although the week is short, several reports could impact the markets.
Tuesday features the NY Empire State index of manufacturing conditions in January. No economists or analysts have offered predictions on this index, which rose to 9.5 in December. It has been climbing lately, as the October reading was 0.61. A big increase could provoke selling in Treasuries.
Wednesday and Thursday feature some heavy hitters. Wednesday’s first report is the producer price index (PPI) for December, which looks for inflation in wholesale prices. A 0.3% increase is expected, the same as the previous month. The PPI core rate, which eliminates volatile prices on energy and food, is expected to duplicate November’s 0.1% increase.
Industrial production could rise 0.5% in December versus a -0.2% reading the previous month. A leap like that could encourage selling in Treasuries, as manufacturing has been struggling to recover. Capacity utilization should creep up to 78.1 from 77.8. Separately, the homebuilder index, which reflects how confident builders are regarding January sales, is due. After remaining steady for several months, it has been climbing one step at a time over the past four months. In December the index hit 21.
Thursday features a host of market movers, with first-time jobless claims for the week ended January 14 up first. If most of the post-holiday layoffs are behind us, claims should more accurately reflect what’s going on regarding job.
This will be followed by the consumer price index (CPI), which checks on inflation at the retail level. It is expected to have risen 0.1% in December after showing no gain in November. The core rate could increase 0.2%, the same as in the previous month. Bond traders should be pleased with these numbers — if they are correct. Inflation robs fixed-rate assets of their value over time.
Housing starts in December are expected to hold at an annual rate of 685,000. This would be a victory of sorts, as starts rose by 57,000 units in November. There is no estimate on building permits, but they, too, increased to an annual rate of 681,000 the previous month.
The Philly Fed index on January manufacturing conditions in the mid-Atlantic region is Thursday’s final report. Although there are no estimates, this index has slowly climbed out of a deep hole. In August 2011, the index read -30.7. Last month it hit 10.3. This is one of the key manufacturing indices, so if it keeps climbing it could slow buying in Treasuries.
The final report of the week is existing home sales in December. Economists believe they will increase to an annual rate of 4.7 million units, from 4.42 million in November. That’s an increase of 28 million units, which would likely spark selling in Treasuries and push the 10-year yield higher.
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January 10th, 2012
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January 9th, 2012
The New Year began with a bang. On Tuesday, the Dow surged well over 200 points at opening on strong manufacturing data from China and India. Then the December ISM index of manufacturing conditions in the U.S. vaulted stocks even higher. The ISM climbed to a better-than-expected 53.9 from the previous 52.7 reading. Any number above 50 indicates sector growth. In addition, the index showed employment was up, as were backlogs of orders.
Even though we entered 2012, however, the economic problems of 2011 remain. In addition, manufacturing growth in Asia is expected to slide. These scenarios will negatively affect U.S. growth.
Construction spending in November rose 1.2% from a revised -0.2% the previous month, which was more good news. In the afternoon, the minutes from the Federal Open Market Committee’s Dec. 13 meeting revealed that its members will begin releasing their individual interest rate forecasts this month. That news was well received, but the committee remains divided on the question of further easing.
Tuesday’s big Wall Street rally, which declined slightly in the afternoon, put a big hurt on bonds. The 10-year note yield, which moves inversely to price, jumped 11 basis points to 1.96% and closed there.
Wednesday was a quiet day trading-wise. The only report, factory orders for November, jumped 1.8% from the previous -0.2%. It was, however, lower than the 2.1% gain analysts expected. Some believe that a strong rebound in factory orders was responsible for the three basis point increase in the 10-year yield, which closed at 1.99%.
Thursday brought mixed news, but concerns about Europe’s never-ending problems outweighed any upbeat economic reports.
First-time unemployment claims fell by 15,000 to 372,000 for the week ended Dec. 31 — slightly below expectations. Continuing claims, those receiving benefits for more than one week, held near 3.6 million.
Payroll company ADP said it added 325,000 jobs to the private sector in December, when 180,000 were predicted. The ADP estimate is usually far higher than the actual count. In addition, outsource firm Challenger, Gray and Christmas said expected job cuts for December rose 30.6%. Separately, the ISM index for the service sector rose to a less-than-expected 52.6 from 52.0. This report, however, seldom moves the markets.
The positive economic news was neutralized by ongoing problems in Europe. The focus is now on Italy, Greece, Spain, France and Hungary, countries currently posing a threat to economic stability. When the final bell rang, the 10-year yield again closed at 1.99%.
A good employment report should have sent stocks up and put pressure on Treasuries, resulting in higher yields. But no! Positive news about the jobs market was unable to calm worries about Europe. That’s how deep concerns run.
In December 200,000 jobs were added to nonfarm payrolls, which beat expectations of 150,000. And the unemployment rate fell to 8.5% instead of rising to 8.7%, as forecast. Earnings and average hours worked also made small gains. When more people work, more money is spent and the economy grows.
Economists, however, believe that 250,000 jobs will have to be added every month to get the GDP back up to a healthy 3%, and that could take years, but it’s a good start. The most recent reading on GDP showed growth at 1.8% for the 3rdquarter of 2011.
Fears about Europe’s economy and a recession in eurozone countries led investors to seek the safe haven of U.S. Treasuries. When the market closed, the yield had dropped back to 1.96%.
The Mortgage Bankers Association, which was closed during the holidays, issued a two-week update on mortgage applications. Between Monday Dec. 19 and Friday Dec. 30 purchase apps fell 9.7% while refis were down 1.9%.
A number of economic indicators are due this week; only three of them might have a major impact on trading. But any day of the week news from Europe could push the markets up or down.
Wholesale inventories for November is due Tuesday. Because the data do not reflect consumer buying, they have little power to sway trading. The results are usually ignored.
Wednesday offers the release of the Fed’s beige book, which looks at economic conditions in the nation’s 12 federal districts. Significant improvement in the majority of districts would likely encourage selling in the bond market. The opposite, however, would also be true.
Thursday two possible market movers are due. The all-important retail sales for December will be released. Analysts, however, are not looking for strong sales. The forecast is for a 0.2% increase, which would be the same as in November, barring revisions. Excluding autos, sales should be up 0.3% — just a tad higher than they were the previous month. Although many stores and online sellers reported strong holiday sales, these predictions don’t bear them out. Should sales exceed expectations, Wall Street would get a boost. If they come in below forecasts, Treasuries would likely benefit.
First-time unemployment claims for the week ended Jan. 7 are also due and often move the markets. Last week claims dropped, but a number of reports kept the selling of bonds in check.
Friday features the preliminary Thomson Reuters/University of Michigan consumer sentiment survey for January. Analysts believe it will climb to 71.0 from 69.9. The survey showed sentiment at 64.1 at the end of November, so a move above 71.0 would be substantial enough to put downward pressure on Treasury prices, which would cause yields to rise.
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December 19th, 2011
On Friday, Dec. 9, Wall Street cheered news the European Union members reached agreement on how to solve its debt problems. Relieved investors sent the Dow Jones average up close to 200 points. But given the weekend to think about it, the conclusion was: not so fast. Monday’s trades gave back Friday’s gains. Investors are now less confident that Europe’s efforts to solve the debt crisis are workable. The saga continues¦
U.S. Treasury bonds, however, benefitted, with the 10-year yield, which moves inversely to price, closing at 2.01%.
Tuesday’s news was difficult to decipher. November retail sales missed expectations by a wide margin, but stocks rose. Sales were up 0.2%, when analysts predicted a 0.4% to 0.6% increase. Nevertheless, stocks jumped at opening and bond prices fell. An hour later stocks declined after German Chancellor Merkel axed a plan to increase Europe’s bailout funds. Separately, business inventories rose 0.8% in October, up substantially from the previous 0.0% outcome.
Stocks plunged after the Federal Open Market Committee meeting due to disappointment that no changes to the Fed’s stimulus policy were announced. In addition, the Fed warned that “strains in the financial markets continue to pose significant downside risks to the economic outlook.” As expected, no change was made to the prime rate, which should hold through mid-2013. The Committee also believes inflation will settle at or below acceptable levels. In addition, the 10-year note saw strong demand. It closed at 1.96%.
On Wednesday the euro fell to its key level of $1.30 — the lowest since mid-January. That in turn made the dollar stronger and raised prices of commodities. It also unnerved the U.S. markets, due to Europe’s financial problems and tight credit in the European banks. In addition, Fed Chairman Bernanke told Republican senators that economic problems in Europe would be detrimental to the U.S.
The only economic news was of little consequence. The import price index rose 0.7%, while the export index was up 0.5%. Stocks posted their third consecutive day of losses, but worried investors bought bonds. The 10-year yield closed at 1.90%.
Thursday could have been a terrible day for bonds, as four of the five economic indicators were better than expected. But investors, anxious about the lack of progress in solving Europe’s debt problems, kept gobbling up bonds — though at a slower pace. The International Money Fund has plans to ask countries outside the eurozone to contribute to the debt fund that will help trouble eurozone nations. But several of those countries have already said they won’t do it. The 10-year note yield tumbled to 1.86%, its lowest level since October.
First-time jobless claims for the week ended Dec. 3 fell to their lowest level since May 2008. There were 366,000 claims filed, down from 385,000 the previous week. Two regional manufacturing indices for December were also positive. The Philly Fed index rose to 10.3 from 3.6 in November, and the NY Empire State index climbed to 9.53 from 0.61. Like jobs and housing, manufacturing has been slow to recover.
The producer price index, which monitors wholesale prices, rose 0.3% from -0.3% in November, which is quite a jump. But the core rate, which eliminates volatile food and energy prices and is the one the Fed watches, rose 0.1% from the previous 0.0% reading.
Finally, industrial production in November dropped to -0.2% from 0.7% in October. Analysts, however, were expecting low numbers, so the markets were prepared. After digesting the economic reports, the 10-year yield closed at 1.91%.
Good news on the inflation front sent prices of stocks and bonds up on Friday — an unusual occurrence. The consumer price index, which tracks inflation at the retail level, saw little change in November. Prices were unchanged from October — always good news. The core rate, which excludes volatile food and energy costs, rose an acceptable 0.2% versus a 0.1% increase the previous month. Bond traders are especially wary of inflation, as it robs longer-term fixed-rate investments of their value.
Stocks took a dive around mid-session, as exhausted traders headed home. Clouds of doubt loom over Europe and its ability to work out of its financial troubles, leaving U.S. bonds and their low yields one of the few safe places to invest. The 10-year note closed at 1.85%.
News regarding mortgage applications has been volatile lately. According to the Mortgage Bankers Association, refinances rose 9.3% for the week ended Dec. 9. Purchase apps, however, fell 8.2%.
It’s the week leading up to Christmas, but that doesn’t affect the number of economic indicators on tap. There is a least one report each day, and some are market movers. Monday’s homebuilders’ confidence index for December is not one of them, but in November confidence hit a 17-month high of 20.
November housing starts will be released Tuesday, with a slight increase expected. Analysts believe starts will rise to an annual rate of 632,000 units from 628,000. Estimates on building permits, which are included in the report, are not available.
Economists believe November was a good month for existing home sales. The report, due Wednesday, should show sales rising to an annual rate of 5.10 million units. This would be a substantial increase from October’s rate of 4.97 million units. Depending on the news from Europe, this increase could weigh on Treasuries, pushing yields up.
Thursday and Friday are loaded with reports prior to the three-day Christmas break. First-time unemployment claims for the week ended Dec.17 are due, and they have been volatile. A big move up or down will likely affect Treasuries.
On the other hand, the final 3rdquarter GDP reading is expected to edge up to 2.1% from the revised 2.0% reading. A move like that would not likely influence trading.
The preliminary Thomson Reuters/University of Michigan reading on consumer sentiment, released two weeks ago, jumped to 67.7 — its highest level since June. If the December final tops that number, Treasury prices would likely fall.
Leading economic indicators for November are also slated, and are expected to show a 0.3% increase — down from the previous 0.9% jump. This indicator attempts to look at the nation’s economic growth over the next six to nine months. The Federal Housing Finance Agency releases its housing price index for September. This is not influential due to dated data. In August prices fell 0.1%.
Three reports close out Friday, beginning with personal income and spending. November income is forecast to rise 0.2%, which is down from the previous 0.4% increase. Spending, however, should be up 0.3%, versus 0.1% in October. More spending boosts the economy, but a drop in income hurts.
The final report estimates are very positive, which could send Treasury yields up if they prove to be correct. Orders for durable goods, items meant to last more than three years, are forecast to have increased 4.6% in November. The previous month they fell 0.5%. And new home sales in November should jump to an annual rate of 313,000 units. That’s up from 307,000 in October.
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December 6th, 2011
Stocks turned around last Monday in the wake of strong Black Friday sales that continued through the weekend. Sales were up 16% versus 2010, giving investors hope that a strong holiday shopping season will follow.
The Dow jumped 300 points at opening, as good news from Europe also kept investors busy. Continued efforts to resolve the European debt crisis were well received, pushing European and Asian stocks upward early Monday. In addition, eurozone leaders are working to craft a fiscal plan for its 17 members.
The only economic indicator showed new home sales in October rose 1.3% to an annual rate of 307,000 units. Sales were up 8.9% from one year ago, with the median price at $212,300. The inventory stands at 162,000 new homes, representing a 6.3-month supply.
Successful bond auctions by France, Italy and Belgium had a positive impact on U.S. Treasuries. In spite of the Wall Street rally, the benchmark 10-year note yield, which moves inversely to price, fell to 1.96% — down one basis point from the previous Friday’s close.
Selling in Treasuries was brisk Tuesday due in part to the huge jump in consumer confidence November. It rose to 56 from a sickly (revised) 40.9 the previous month, the highest level since July. A reading of 90 indicates a healthy, growing economy.
The Federal Housing Finance Agency reported September home prices rose 0.9%. But the S&P/Case Shiller index of home prices in the nation’s 20 largest cities showed only Detroit and Washington D.C. benefitted from price increases over the past 12 months. In addition, 3rdquarter prices fell 3.9% to 2003 levels. The yield on the 10-year note ticked up to 2.0% at close.
Good news on several levels sent the Dow Jones up more than 400 points early Wednesday. The payroll company ADP said 206,000 jobs were added to nonfarm payrolls in November, while other surveys estimate that about 125,000 new jobs will have been added. Challenger, Gray and Christmas, an outsource firm, said that announced job cuts for November fell 12.8%.
A revised report on 3rdquarter productivity showed a weaker-than-expected 2.3% increase in production, but at the same time labor costs fell 2.5%. Pending home sales in October jumped 10.4% — the biggest monthly increase since Nov. 2010.
The main impetus for the Wall Street rally was news that the U.S. Federal Reserve and other countries’ central banks coordinated a plan to reduce the cost of borrowing U.S. dollars internationally. This would lower interest rates, make more money available to borrowers and make it cheaper for world banks to trade in U.S. dollars. This should also increase the banks’ ability to make loans to consumers and businesses. In addition, eurozone finance ministers OK’d an increase to the region’s bailout fund, which may also receive IMF money. And China said it would cut its banks’ reserve requirements to loosen up money for lending.
These events dried up the need for safe-haven buying but pushed the Dow up almost 500 points at closing, its biggest gain of the year. The yield on the 10-year note edged up seven basis points to a still-low 2.07%.
Thursday’s release of first-time jobless claims for the week ended Nov. 26 climbed above 400,000 for the first time since Oct. 22. Claims totaled 6,000 more than the previous week, coming in at 402,000. The more-reliable four-week average rose by 500 to 395,000 and continued claims, those receiving unemployment insurance for more than one week, also increased.
The ISM index on November manufacturing conditions was higher than expected at 52.7, up from 50.8. Construction spending rose sharply, posting a 0.8% increase, up from the previous 0.2% reading.
Traders on Wall Street took a breather prior to Friday’s release of the November employment report. No news impacted Treasuries, either. The yield held at 2.07%.
The November employment report showed 120,000 jobs added to nonfarm payrolls, while the unemployment rate plunged to a two-year low of 8.6%. Initially, stocks jumped and Treasuries sold. Although there is agreement that the economy is improving, a look behind the curtain revealed an employment picture fraught with problems.
As many people gave up looking for jobs last month as were hired. Seasonal hiring also played a big part. In addition, state and local governments cut 20,000 jobs and have eliminated 600,000 positions over the past two years.
After studying these data, investors reiterated that employment numbers must be higher (at least 250,000 jobs a month) to get the economy rolling. The three major stock indices fell into negative territory, and buyers turned to the safety of Treasuries. Stocks were also hindered by the possibility of financial problems for the U.S. as a result of revised eurozone plans. The yield on the 10-year note, which jumped to 2.14% after the jobs report, fell to 2.05%, where it closed.
Mortgage applications fell sharply during the week ended Nov. 25 but, of course, it was Thanksgiving week. Purchase apps dropped 18.2% from the previous week, while refis were off 15.3%, according to the Mortgage Bankers Association.
A handful of economic reports are due this week, and only two of them are likely to impact trading. Eurozone nations, however, appear to be on a track that could lead to resolution on some of their economic problems. If this comes to pass, it could put selling pressure on Treasuries, and yields would rise.
The ISM index on the service sector for November and October’s factory orders are due Monday morning. The ISM service index does not have the weight of the manufacturing ISM, but it can move the markets. Forecasts indicate that it will edge up to 53.5 from 52.9, which is good but not great. Anything higher, however, could hurt Treasury yields.
October factory orders are expected to slide 0.6%, which would be a significant drop from the 0.3% increase in September. This report, however, contains little new data; so its impact is minor.
No economic releases are due Tuesday or Wednesday, so the markets must wait until Thursday when first-time unemployment claims for the week ended Dec. 3 are released. While these data can move the markets, which way they will go is anyone’s guess. Separately, wholesale inventories for October are due, but no forecasts have been made. Generally, this report is a non-event.
The Thomson Reuters/University of Michigan preliminary consumer confidence survey for December will be released Friday and could impact Treasuries in a negative way. Although no formal forecasts are available, the strong Black Friday sales weekend should boost confidence. The November final reading was 64.1.
The U.S. trade balance for October is expected to increase to $43.5 billion from $43.1 billion. This should not disturb the markets.
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