February 28th, 2011 8:21 AM by Lehel S.
Very quiet this morning, treasuries and mortgage markets unchanged from Friday's closes at 9:30. At 8:30 Jan personal income and spending; income rose more than expected, up 1.0% and spending up 0.2%. The overall price index increased 0.3%, yr/yr +1.2%; the core (ex food and energy) +0.1% and yr/yr +0.8%. The Fed and markets continue to view inflation without food and energy so in that context inflation is subdued. Markets should be more focused on the core inflation but as long as inflation is measured without food and energy it is what it is, even if it isn't right in our view.
At 9:30 the DJIA opened +45, the 10 yr unch and mortgage prices -1/32 (.03 bp). There was nothing new out of the roiled Mideast over the weekend; the Saudi government making comments that more is required to help citizens to keep that nation from boiling over. Crude oil this morning trading lower. As long as oil doesn't increase the equity markets should do somewhat better and the rate markets have little impetus to improve.
At 9:45 this morning Feb Chicago Purchasing Mgrs index; expected at 67.5 frm 68.8 in Jan, it jumped to 71.2 one of the highest readings for that index since Jan 1983. The sub-components however were not that spectacular, the new orders index at 75.9 frm 75.7 in Jan; employment index at 59.8 frm 64.1, and price index at 81.2 frm 81.7. The report didn't cause any movements in equity or rate markets.
At 10:00 Dec pending home sales were expected to have declined 3.2%, sales declined 2.8%. No reaction to the decline.
This Week's Economic Calendar:
10:00 am Jan construction spending (-0.6%)
Feb ISM manufacturing index (60.5 frm 60.8)
3:00 pm Feb auto and truck sales (N/A)
7:00 am weekly MBA mortgage applications (N/A)
8:15 am Feb ADP non-farm private jobs (+163K)
2:00 pm Fed Beige Book
8:30 am weekly jobless claims (+9K to 400K; continuing claims 3.80 mil frm 3.97 mil last week)
Q4 revision of productivity (+2.3% frm +2.6% on the advance report last month)
Q4 unit labor costs (-0.3% frm -0.6% on the advance report)
10:00 am Feb ISM services sector index (59.0 frm 59.4 in Jan)
8:30 am Feb employment report (non-farm jobs +180K, non-farm private jobs +193K, the unemployment rate 9.1%, +0.1% frm Jan; average hourly earnings +0.2%)
10:00 am Jan factory orders (+2.1%)
We have all the scheduled data out now and there has been no movement so far this morning in the interest rate markets. Still concerns over the oil markets, crude continues to decline this morning, down $0.77 at 10:00. As we have noted recently, as long as oil prices are not increasing the bond and mortgage markets don't have the support to improve in price or fall n yield. The stock market is getting stronger as the morning rolls on. Stay alert today if floating.