The last day of the quarter and half way through the year. A short week but a lot of data and Fed speak; the stock market will close at 1:00 on Thursday and markets closed on Friday. In the meantime there are a number of key reports and the June employment data to work through, kind of like cramming for a final exam. Interest rate markets started slightly better this morning with stock indexes a little lower. Not much news over the weekend; the turmoil in Iraq spreading into Syria, the Islamic State of Iraq and al-Sham (ISIS) expanding its foothold in Syria after recent gains in Iraq. Not much reaction to the mid-east mess in our markets, but eyeballs are focused on the events as they unfold.
The DJIA opened -41, NASADAQ -1, S&P -2; 10 yr 2.53% unch and 30 yr MBS prices +6 bps frm Friday’s close.
The first report this week; at 9:45 the June Chicago purchasing mgrs. index, expected at 64.0 frm 65.5 in May, as reported the index was a little lower, at 62.6. There was no noticeable reaction to the weaker index, still well over 50 and still implies expansion. With employment data on the horizon it will take a huge miss on the rest of this week’s data to move markets.
The second report of the week at 10:00; NAR’s May pending home sales (contracts signed but not yet closed), was expected to up 1.0% frm April’s increase of 0.4%. A surprising increase of 6.1%; NAR saying sales increases are being fueled by an increase in inventories.
We don’t expect any significant changes in the stock or bond markets until Wednesday if Janet Yellen rocks the boat in her speech at the IMF conference; most likely she won’t drop any tape bombs though. Thursday’s June employment report is as usual elephant in the room. The status of the economy continues to roil markets, interest rates at low levels suggest the bond market is betting on a weaker 2014 growth that most presently expect to be at about 3.0% to 3.5%; the stock market is worrying but so far no mass selling. Uncertainty keeps stock indexes from taking off in another run higher, the same uncertainty is keeping stocks frm declining. Interest rates at these levels will need additional assurance that the Fed will not increase rates early in 2015 as some Fed officials are now thinking. That assurance will require continual weaker economic outlooks. The initial reaction the stronger May pending home sales already has pushed MS prices 6 bps lower than at 9:30 this morning.
This Week’s Economic Calendar:
9:45 am June Chicago Purchasing Mgrs. index (64.0 frm 65.5 in May)
10:00 am May pending home sales (+1.0% frm +0.4% in April)
10:00 am June ISM manufacturing index (55.6 frm 55.4 in May)
May construction spending (+0.5% frm +0.2% in April)
No Time June auto and truck sales (+16.4 mil frm 16.8 mil in May)
7:00 am MBA mortgage apps
8:15 am ADP Private jobs in June (+213K, May 179K)
10:00 am May factory orders (-0.3%, +0.7% in April)
11:00 am Janet Yellen at IMF conference
8:30 am weekly jobless claims (314K +2 K)
June unemployment rate (6.3% unchanged frm May)
NFP jobs (+211K)
Private jobs (210K)
Avg. hourly earnings (+0.2%)
May US trade deficit (-$-45.1B)
10:00 am June ISM services sector index (56.2 frm 56.3 in May)
1:00 pm Markets close
PRICES @ 10:20 AM (EST)
10 yr note:-1/32 2.54% unch
5 yr note:-1/32 (3 bp) 1.65% +1 bp
2 Yr note: unch 0.47% unch
30 yr bond: +4/32 (12 bp) 3.36% -0.5%
Libor Rates: 1 mo 0.151%; 3 mo 0.234%; 6 mo 0.326%; 1 yr 0.545%
30 yr FNMA 4.0 July: @9:30 106.03 +6 bp (-6 bp frm 9:30 Friday) (-9 bp on 3.5 coupon)
15 yr FNMA 3.0 July: @9:30 103.79 +13 bp (+7 bp frm 9:30 Friday)
30 yr GNMA 4.0 July: @9:30 106.72 +8 bp (-7 bp frm 9:30 Friday)
Dollar/Yen: 101.44 +0.02 yen
Dollar/Euro: $1.3660 +$0.0011
Gold: $1315.20 -$4.80
Crude Oil: $105.57 -$0.17
DJIA: 16,866.77 +14.93
NASDAQ: 4408.81 +10.88
S&P 500: 1963.69 +2.73