Market Analysis

Bonds opened slightly up this morning on a weaker than expected September Personal Incomes and Spending report showing Incomes down .1% vs expectations of a .3% increase and Spending up .2% vs expecations for a .4% increase.  Bonds turned negative though when the October Institute of Supply Management Manufacturing report came in better than expected with a 56.9 reading vs expectations of a 54.0 reading and a Sept reading of 54.4 and September Construction spending came in up .5% vs expectations for a .5% decline.

The key economic data for this week are the two Institute of Supply Management (ISM) reports (Manufacturing today and Service sector on Wednesday), September Factory Orders on Wednesday, Weekly Unemployment Claims on Thursday and the biggest report of the week, October’s Non Farm Payroll report on Friday. Non Farm Payrolls are expected to have increased by 61,000 jobs, all from the private sector. The public sector is expected to have not dropped in payrolls which would be a reversal of the recent trend of public sector payroll losses.

Additionally influencing the markets this week will be the elections tomorrow and , more importantly, the Federal Reserve announcement on Quantitative Easing (known as QE2). It is not yet clear if the bond markets will respond favorably to QE2. At this point, the two analysts who we use to track mortgage rates are cautiously floating going into Wednesday with a note to be prepared to lock immediately if the market responds negatively.

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