October 3rd, 2011 7:26 AM by Lehel S.
The bond and mortgage markets started nicely this morning with early trading in stock index futures were pointing to a weaker open at 9:30. Friday the bond market held its key supports then rallied as the stock market basis the DJIA dropped 240 points. Stock indexes still quite volatile and likely will remain that way for a long time as investors and traders try to make a buck with high frequency trading.
The economy is declining yet there are those that believe these are buying opportunities for that "in the long run" investments----most that espouse that view are Wall Street firms that make money on investor buying. Greece failed its austerity tests the the EU, IMF and the ECB demanded but the EU isn't ready to let Greece fail yet, only a matter of time though it will. Its time to cut the country loose and let it fail. For months global markets and economies have been focusing on Greece and what European leaders will do. Europe's banks don't want to take loses, unfortunately for them there isn't any choice in the end.
This week has a lot of economic releases but the key is Friday's employment report. Euro-area finance chiefs will meet today in Luxembourg to weigh the threat of a Greek default, grapple with how to shield banks from the fallout and consider a further boost to the rescue fund. A much-needed “liquidity backstop” for the region must come from governments because the European Central Bank’s mandate requires it to keep purchases of sovereign debt extremely limited.
At 9:30 the DJIA opened -30, NASDAQ -12, S&P -4; the 10 yr note +15/32 to 1.87% -5 bp, mortgage prices on 30s +13/32 (.41 bp).
At 10:00 this morning Sept ISM manufacturing index expected at 50.5 frm 50.6, increased to 51.6; new orders component unchanged at 49.6, prices pd at 56.0 frm 55.5 and employment at 53.8 frm 51.8. The initial reaction to the better data turned stock indexes from -89 on the DJIA to -25, the 10 yr note traded +198/32 prior to 10:00 but generally held as safety trades being put back on with Greece unable to meet the goals for more funds.
Also at 10:00 August construction spending expected own -0.5%, as reported spending increased 1.4%.
This Week's Economic Calendar:
10:00 am Sept ISM manufacturing index (as reported 51.6)
August construction spending (as reported +1.4%)
3:00 pm Sept auto and truck sales (autos 4.1 mil, trucks +5.5 mil)
10:00 am August factory orders (-0.1%)
7:00 am MBA weekly mortgage applications
8:15 am ADP private jobs for Sept (+45K)
10:00 am ISM Sept services sector index (52.8 frm 53.3)
8:30 weekly jobless claims (+11K to 402K)
8:30 Sept employment data (non-farm jobs +60K, non-farm private jobs +83K, unemployment rate unch at 9.1%)
10:00 am August wholesale inventories +0.5%)
3:00 pm August consumer credit (+$7.0B)
10:00 ISM took some of the bullishness away from early activity in the bond market and stopped selling in equity markets. Still not much investing in equities, just traders moving the indexes in huge wide ranges. Technically the 10 yr and mortgages held key technical bullish levels last week. The rest of the day will be, as usual these days, will be watching stock indexes and any news out of Europe.
At 10:15 the bond and mortgage markets were -6/32 (.18 bp) frm 9:30.