Monday, June 22, 2009

Summer Solice

Summer has begun and with it a reality check for the equity markets. I personally moved out of equities into safer instruments. I anticipate a negative trading range through mid-September. We've had a nice seven week run, but with little positive economic news supporting this position, we are due for a correction. No mentioned this week of Jobs. Keep an eye on these reports going forward. If the employment figures don't improve over the next three months, things might turn for the worse.

Date & Time
Economic Indicator
Consensus Estimate
My Analysis

Mon. June 22
Nothing of relevance

Tue. June 23, 9:00 a.m. ET
First day of a two-day Fed meeting

Tue. June, 23, 10:00 a.m. ET
May Existing Home Sales Up 2.7%
The pace of the decline for existing home sales continues to soften – suggesting to some analysts that the housing sector may be within months of reaching a meaningful bottom. Look for this report to have little influence on the market until/unless the pace of sales shows a trend of positive gains.

Tue, June 23, 1:00 p.m. ET
Treasury auctions $40 bil. of 2-year notes
The relative short maturity of this security should be attractive to a large number of investors. If so, this event will likely have little, if any meaningful impact on the direction of rates.

Wed. June 24, 8:30 a.m. ET
May Durable Goods Orders Ex. Transportation
-0.7% vs. last +1.7% -0.4% vs. last +0.4%
These figures will likely draw little more than a passing glance from market participants.

Wed. June 24, 10:00 a.m. ET
May New Home Sales
Up 2.2%
Big price concessions from builders and relatively low mortgage interest rates likely combined to nudge the pace of new home sales fractionally higher.

Wed. June 24, 1:00 p.m. ET
Treasury auctions $37 bil. of 5-year notes
The yield on this security is just a whisper below 3.0% -- a level likely high enough to draw solid bids from both domestic and foreign investors. If so, this event will tend to be supportive of steady to perhaps fractionally lower mortgage note rates.

Wed. June 24, 2:15 p.m.
The Fed releases its post meeting statement
No change to short term interest rates The Fed’s post-meeting statement will probably be upbeat regarding recent signs of improving economic conditions even though further deterioration in the labor market is expected. There is only a minuscule chance the Fed will choose to expand its plans to purchase mortgage-backed securities or Treasury obligations.

Thurs. June 25, 8:30 a.m. ET
Initial jobless claims for the week ended 6/25
Down 8,000
For most investors it is still too early to conclude the worst of this recession’s employment erosion is behind us. Look for this data to have little, if any meaningful impact on the mortgage market.

Thurs. June 25, 8:30 a.m. ET
Final revision Q1 GDP -5.7% vs. last -5.7%
Gross Domestic Product, a statistical measure of the value of all goods and services produced in the country, will post its first back-to-back quarterly decline in more than 50 years. A GDP reading of -5.7% is already priced into the markets. It will likely take an unexpected reading of -5.0% or better to put any upward pressure on interest rates resulting directly from this release.

Thurs. June 25, 1:00 p.m. ET
Treasury auctions $27 bil. of 7-year notes The result of this auction will likely exert a significant amount of pressure on the trend trajectory of mortgage interest rates for the balance of the week. A well bid auction will tend to support steady to note rates for bonds and mortgages while a poorly bid auction will probably lead investors to nudge interest rates incrementally higher.

Fri. June 26, 8:30 a.m. ET
May Personal Income Spending
PCE Index +0.3% vs. last +0.5% +0.3% vs. last -0.1% +0.1% vs. last +0.3%
If, as expected, the personal consumption expenditure index (one of the Fed’s favorite measures of inflation at the consumer level) matches or falls below the forecasted value -- this report will tend to be supportive of steady to fractionally lower rates.