Market Analysis

Friday's Non Farm Payroll report which showed just 18,000 jobs added in June with 57,000 added in the Private Sector and 39,000 lost in the Public Sector, was a surprise to all. Analysts had increased their projections for Non Farm Payroll growth after' ADP's private sector job change report last week came in much higher than expected. In addition to a very low # for June, Non Farm Payroll growth was revised down for April and May also.

Last Friday's report creates the backdrop for what will occur this week. Prior to Friday's report, analysts had expected weak demand for US treasury auctions and a slight increase in rates given that the Federal Reserve is no longer purchasing the bulk of Treasury notes. Now, the "flight to safety" trade has re-appeared and analysts are uncertain as to the outcome of this week's $66 billion in Treasury Auctions . The Federal Reserve was previously purchasing about 2/3 of US debt issues and it is not yet clear what yield level supply and demand without government intervention will produce. As such, this week could be a volatile one for rates.

This week's economic calendar is light at the beginning, but Thursday and Friday will be packed with releases. On Thursday we will see Initial and Continuing Jobless Claims (analysts are expected 418,000 Initial Claims for the week ended 7/9), June Retail Sales (analysts are expecting a .2% decline with a 0% change for Retail Sales with the automotive component stripped out) and the June Producer Price Index (analysts are expected a .2% decline in the headline figure due to lower energy costs and a .2% increase in the Core rate excluding food and energy). On Friday, we will see the June Consumer Price Index (analysts are expected a .1% decline in the headline figure and a .2% increase in the Core rate), the July Empire State (NY) manufacturing index (analysts are expecting a reading of 1.0 vs last month's negative 7.8 reading), June Industrial Production and Capacity Utilization (analysts are expecting a .2% increase in Production and 76.8% Capacity Utilization, up from 76.7% in May), and the University of Michigan initial July Consumer Sentiment Index (analysts are expecting of 71.4, a slight decline from June's 71.5 reading).