Market Analysis

Bonds opened negatively and stocks up this morning. US Treasury notes have moved to break even. Mortgage-backed securities are still slightly in the red. Markets are responding to a lower than expected decline in growth in China which reported 8.9% growth for the 4^th Qtr 2011. Equity investors are shrugging off Friday’s after-close downgrade by S&P of nine Eurozone governments including France (from AAA to AA+), Austria (from AAA to AA+), Slovenia (from AA- to A+), Slovakia (from A+ to A), Spain (from AA- to A), Malta (from A to A-), Italy (from A to BBB+), Cyprus (from BBB to BB+) and Portugal (from BBB- to BB). S&P also downgraded the European Financial Stability Facility (from AAA to AA+).

Below is a recap of this week’s economic calendar:

Tuesday, Jan 17

• January Empire (NY) Manufacturing Index – came in at 13.5 which was better than the 10.0 expected and 9.5 for December.

Wednesday, Jan 18

• December Producer Price Index (PPI) – expected up .1% vs .3% increase in November. Core PPI (excluding food and energy) expected up .1% which would match November’s increase.
• December Industrial Production and Capacity Utilization – Production expected up .5% vs down .2% in November. Capacity Utilization expected up to 78.1% from 77.8% in November.

Thursday, Jan 19

• Initial Jobless Claims Week Ended 01/14/11 – expected 385,000 vs 399,000 the prior week.
• December Consumer Price Index (CPI) – expected up .1% vs unchanged in November. Core CPI expected up .1% vs up .2% in November
• December Housing Starts and Building Permits – Starts expected at annualized pace of 673,000 vs prior pace of 685,000. Permits expected at annualized pace of 680,000 vs prior pace of 681,000
• January Philadelphia Fed Index – expected 10.0 reading vs 10.3 in December

Friday, Jan 20

• December Existing Home Sales – expected annualized pace of 4.55 million vs prior pace of 4.42 million