Market Analysis

Both bonds and stocks are up today. Stocks are up in response to the official announcement from the National Bureau of Economic Research that the recession officially ended in June 2009. The announcement was not unexpected but seemed to provide psychological support to those equity investors who believe that too much bad news has been priced into the market. Those investors view the current bond market with yields of the 10 Yr Treasury below 3% as overpriced and representing the latest iteration of a bubble which is created every time the masses flock to a particular asset class. Bond investors though are holding their ground as some believe the Federal Reserve may soon announce a new round of quantitative easing with additional Treasury note purchases over and above their current program of reinvesting the proceeds from their already large portfolio of mortgage-backed securities and Treasury notes into further purchases. As such the markets will be looking closely to the post-meeting statement released tomorrow by the Fed for any hints of additional Treasury purchases. What is fascinating is that while the market seems to want the Fed to announce such a program, most analysts seem to believe that such a program would do little to stimulate the economy.

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

Monday, September 20, 2010

• September National Association of Home Builder’s Market Index – this measure of home builder confidence remains at an 18-month low. The index which was expected to come in at 14 came in at 13.

Tuesday, September 21, 2010

• August Housing Starts – expected to come in at an annualized pace of 550,000 units, up 4,000 from July.
• August Building Permits – expected to come in at an annualized pace of 560,000 units, up 1,000 from July.
• Federal Reserve Open Market Committee Rate Decision and Post Meeting Statement – no change is expected in the Fed Funds Rate or Fed Discount Rate. However, the market will be watching carefully for any hints of a new “quantitative easing” program whereby the Federal Reserve prints money to purchase US Treasury notes.

Wednesday, September 22, 2010

• Economic calendar vacant

Thursday, September 23, 2010

• Initial Jobless Claims week ended 9/18/10 – expected to be flat at 450,000
• Continuing Jobless Claims week ended 9/11/10 – expected to be down 35,000 to 4.450 million.
• August Existing Home Sales – expected to come in at an annualized pace of 4.1 million vs a pace of 3.83 million in July.
• Conference Board’s August Leading Indicators – expected up .1% vs up .1% in July

Friday, September 24, 2010

• August Durable Goods Orders – expected down 1.4% vs up .4% in July. Excluding the transportation component, expected up .6% vs down 3.7% in July.
• August New Home Sales – expected annualized pace of 291,000 up from annualized pace of 276,000 in July.