Market Analysis

Bond markets are flat this morning with a very slight negative bias. Stocks are up slightly in early morning trading.

The chatter this week is on the Federal Reserve Open Market Committee (FOMC) meeting tomorrow. Investors are watching to see if the Federal Reserve hints at further quantitative easing (for instance buying more US Treasury obligations). Should the Fed decide to do this it is possible rates could inch lower. Should the Fed indicate that step is not necessary, it is possible we could see slight upward pressure on rates asl the speculation that the Fed will do something has provided some support to recent Treasury prices.

Below is a recap of the economic calendar for this week:

Monday, August 9, 2010

• Economic calendar vacant

Tuesday, August 10, 2010

• 2^nd Qtr 2010 Preliminary Productivity and Unit Labor Costs – productivity expected to have droped from a 2.8% improvement in the 1^st Qtr to a .1% improvement as the law of diminishing returns sets in on the amount of additional productivity that can be squeezed from each employee. Unit Labor costs are expected to have increased 1.4% vs a 1.3% decline in the 1^st Qtr.
• June Wholesale Inventories – expected increase of .4% vs .5% in May.
• US Treasury sells $34 billion in 3-year notes – demand is expected to be strong.
• Federal Reserve Open Market Committee post meeting statement – no change expected in rates. Market participants are watching for a Fed decision on whether they plan to purchase additional Treasury notes .

Wednesday, August 11, 2010

• June Trade Balance – deficit expected to have increased to $42.5 billion from $42.3 billion in May.
• US Treasury sells $24 billion in 10-year notes – investors will be watching demand closely for this auction as some are speculating that we may be reaching a bottom on rates and that investors resistance to higher prices and lower yields could be evident by the level of bidding for this auction.

Thursday, August 12, 2010

• Initial Jobless Claims for the Week Ended 8/7 /10 – claims expected to have dropped 14,000 from 479,000 to 465,000
• Continuing Jobless Claims for the Week Ended 7/31/10 – claims expected to have increased 13,000 from 4.537 million to 4.550 million.
• US Treasury sells $16 billion in 30-year bonds – investors will be watching this auction as well as a test of investor appetite for securities with longer term maturities at current low yields.

Friday, August 13, 2010

• July Consumer Price Index (CPI) – expected up .2% vs down .1% in June. Excluding food and energy, core CPI expected up .1% vs up .2% in June.
• July Retail Sales – expected up .5% vs down .5% in June. Excluding the automotive component, expected up .2% vs down .1% in June.
• August University of Michigan Initial Consumer Sentiment Index – expected 70.0 reading vs 67.8 in July.
• June Business Inventories – expected up .2% vs up .1% in May.