Market Analysis

Today's Market Update Video - More Analysis Below Video 

Bonds have opened flat this morning in front of a key week for economic data. Last week the bond market recovered some, but not all of of the losses incurred during the prior two weeks. Analysts are now flashing warning signals in terms of possible negative volatility for bonds. Much will depend on the Middle East. If investors begin to believe that civil unrest throughout the Middle East will drive oil prices up from the high 90’s to the mid 100’s and that Americans will see gas prices hit the $4 per gallon market, then stocks would be expected to move lower and bonds would be expected to benefit, with the caveat that investors would need to continue to believe that higher fuel prices will not spill over into other goods and spark a higher Core inflation rate (excluding food and energy). However, if the Middle East sees tensions decrease, and if economic news continues to come in better than expected, then stocks are expected to improve at the expense of bonds.

This week’s economic calendar includes today’s January’s Personal Income and Spending report (Income was up 1.0% which was much better than the .4% expected increase but Spending was up only .2% vs expectations for a .4% increase). Later this morning, the February Chicago Purchasing Manager’s Index and December Pending Home Sales figures will be released. Tomorrow (Tues) we will see January Construction Spending and February’s Institute of Supply Management Manufacturing Index. Wednesday, we will see February Challenger Job Cuts, February ADP Employment Charge and the March Federal Reserve Beige Book report. Thursday we will see weekly Initial and Continuing Jobless Claims, 4^th Qtr 2010 Revised Productivity and Unit Labor Costs and February’s Institute of Supply Management’s Service Sector Index. Friday will be the big day of the week with February’s Non Farm Payroll Report. Also on the Friday January’s Factor Orders report will be released. February’s Non Farm Payroll Report is expected to show payrolls increased approx 180,000, with the Private Sector increasing payrolls by approx 190,000 and the Public Sector shedding about 10,000. Last month’s January Non Farm Payroll report showed only a 36,000 increase. Investors wrote that off as an anomaly caused by the weather. This week’s report is even more critical to show that the job market continues to improve.

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