February 6, 2012

It was quite the rollercoaster ride last week.  We started with the FOMC’s comments from the week before still lingering, about extending the time frame of keeping rates low until late 2014, and finished the week off with stronger than expected employment data.  Tuesday’s Consumer Confidence (61.1 act. vs 68.0 est.) went along with the fed’s poor assessment of the economy, as did Bernanke’s testimony to the House Budget Committee.  But that mood changed on Friday: the nonfarm payroll number (243k act. vs 140k est.) and the unemployment rate (8.3% act. vs 8.5 est.) both came in above the forecasts, with the unemployment rate falling to the lowest since February 2009.  Then the ISM Non-Manufacturing index, which comprises approximately 90% of the economy, also came in much higher than expected (56.8 act. vs 53.2 est.) for its highest reading since February 2011.  These numbers gave support to the prospect that the economic recovery is taking hold, but more than one month of good employment data is needed. We still have problems in Europe and housing, and there are still a lot of headwinds that businesses and consumers have to confront.   

This week there isn’t a lot of economic news, but we do have plenty of treasury supply that needs to be auctioned.  We also have Bernanke testifying before the Senate Banking Committee tomorrow, and markets will be watching to see if he makes any changes to last week’s comments after Friday’s employment numbers.  (I doubt it.)

			Expected		Previous
2/6	Monday
2/7	Tuesday	Consumer Credit (Dec)	$7.000B	vs	-$20.374B
		Bernanke Testifies Senate Banking
		1-Year Treasury Bill Auction $25B
		3-Year Treasury Note Auction $32B
2/8	Wednesday	MBA Mortgage Applications (Jan)		vs	-2.9%
		10-Year Treasury Note Auction $24B
2/9	Thursday	Wholesale Inventories (Dec)	+0.4%	vs	+0.1%
		European Central Bank Decision (No Change)	1%	vs	1%
		Bank of England Rate Decision (No Change)	0.50%	vs	0.50%
		30-Year Treasury Bond Auction $16B
		Jobless Claims (Feb 4)	370k	vs	367k
2/10	Friday	Trade Balance (Dec)	-$48.5B	vs	-$47.8B
		U of Michigan Confidence (Feb)	74.5	vs	75.0
		Monthly Budget Stmt. (Jan)	-$45.0B	vs	-$49.8B

Treasury Curve

Maturity	Yield 2/6/12	Monday 1/30/12
1-Year	0.13	0.11
2-Year	0.23	0.21
5-Year	0.76	0.72
10-Year	1.92	1.84
30-Year	3.11	2.99

	2/3/12	+/-	7:00 A.M.	+/-
Dow	12862.23	+156.82	12812.96	-49.27
MSFT	30.24		30.10	-0.14
BA	76.30		75.47	-0.83

January 30, 2011

The big news last week was the announcement by the fed that it is extending the expected time frame for keeping rates low from mid-2013 to late 2014.  The lack of improvement in the unemployment rate and housing markets and expectations that inflation will remain stable caused the fed to make this announcement. One thing to remember, though, is that these are economists’ projections, and economists make weather men look good, even though I do think it will be a while before we see any real improvement in the economy or labor markets.  Then on Friday we got our first look at 4th Quarter GDP (+2.8% act. vs +3.0% est.), which improved over the 3rd Quarter’s +1.8% but was shy of expectations; most of the improvement was from inventory buildup.

This week the big news will be Friday’s employment/unemployment numbers and then the ISM numbers for Manufacturing on Wednesday and Non-Manufacturing on Friday.  Employment numbers are expected to drop from last month, with unemployment holding steady at +8.5%, and both ISM indices are expected to improve.  Of course, the European debt crisis can still change markets quickly, as Greece works out the terms of its rescue package.

			Expected		Previous
1/30	Monday	Personal Income (Dec)	+0.4%	vs	+0.1%
		Personal Spending (Dec)	+0.1%	vs	+0.1%
		Core PCE (Dec)	+0.1%	vs	+0.1%
1/31	Tuesday	Employment Cost Index (4th Qtr.)	+0.4%	vs	+0.3%
		Chicago Purchasing Mgr. (Jan)	63.0	vs	62.5
		Consumer Confidence (Jan)	68.0	vs	64.5
2/1	Wednesday	ADP Employment Change (Jan)	183k	vs	325k
		Construction Spending (Dec)	+0.5%	vs	+1.2%
		ISM Manufacturing (Jan)	54.5	vs	53.9
		ISM Prices Paid (Jan)	50.0	vs	47.5
2/2	Thursday	Unit Labor Costs (4th Qtr.)	+0.9%	vs	-2.5%
		Nonfarm Productivity (4th Qtr.)	+0.8%	vs	+2.3%
		Jobless Claims (Jan 28)	370k	vs	377k
2/3	Friday	Nonfarm Payrolls (Jan)	145k	vs	200k
		Private Payrolls (Jan)	163k	vs	212k
		Unemployment Rate (Jan)	+8.5%	vs	+8.5%
		Avg. Hourly Earnings (Jan)	+0.2%	vs	+0.2%
		Avg. Weekly Hours (Jan)	+34.4	vs	+34.4
		ISM Non-Manufacturing (Jan)	53.2	vs	52.6
		Factory Orders (Dec)	+1.5%	vs	+1.8%

Treasury Curve

Maturity	Yield 1/30/12	Monday 1/23/12
1-Year	0.11	0.10
2-Year	0.21	0.23
5-Year	0.72	0.91
10-Year	1.84	2.06
30-Year	2.99	3.14

	1/27/12	+/-	7:00 A.M.	+/-
Dow	12660.46	-74.17	12559.62	-100.84
MSFT	29.23		29.13	-0.10
BA	74.55		74.02	-0.53