Another quiet start this morning. At 8:30 the data for the session; weekly jobless claims down 1K to 261K, the 4 week average 264K from 265.25K the previous week. Claims are flat lining the last six weeks with little change from week to week sticking around the 265K weekly level. July durable goods orders, after two months of declines increased 4.4% against 3.7% expected; excluding the volatile transportation orders up 1.5% against estimates of 0.5%. Yr/yr -3.3%, ex transportation orders yr/yr -0.6%. Unfilled orders down 0.1% in July on top of June’s 0.9% decline; the lack of unfilled orders is not only a negative for production but also for employment. On the plus side, inventories broke a long run of contraction with a 0.3% rise and are still very lean with the inventory-to-shipments ratio unchanged at 1.64.
This afternoon Treasury auction $28B of 7 yr notes at 1:00 pm. Yesterday’s 5 yr auction met with strong demand.
Jackson Hole is underway; top central bankers and economists from around the world to discuss monetary policy issues behind closed doors. But this year a different wrinkle, eight central bankers, among them Fed governor Lael Brainard and New York Fed President William Dudley, will meet with and answer questions from about 120 activists from the Campaign for Popular Democracy’s Fed Up Campaign, a left-leaning group working to change the way the powerful central bank works. A growing momentum to change how the Fed functions, for three years now most of the key news has centered around the Fed. Frustrations are mounting not only with activist groups but within the finical community. The Fed’s track record forecasting the economy has been miserable for two years; each quarter forecasting the economic outlook only to continually revise the outlook lower. The Fed Up leaders looking for clarity and pushing for more diversity within the Fed, saying the Fed favors big money and doesn’t pay enough attention to the little people.
Markets not concerned about the meeting today with Fed Up; it’s all about how Janet Yellen thinks about a rate increase; when it will happen if at all. She has been quiet recently letting the regional presidents talk whether they are voters or not. Markets presently evenly divided about an increase timing, the majority not expecting a move at the Sept meeting but its 50/50 about Dec. Still though there are strong voices believing the Fed won’t (can’t) move this year and maybe next year also. A rate hike will push rates higher, the dollar stronger and may turn the equity markets down. Stocks are over-valued based on the GDP growth outlook, profits and future earnings outlooks and it won’t take much to tip the present balance.
Beside Yellen tomorrow Q2 revision of GDP expected at an anemic 1.1% from 1.2% on the advance report last month.
At 9:30 the DJIA opened -25 after dropping 65 yesterday, NASDAQ -9, S&P -4. The 10 at 1.57% +1 bp. FNMA 3.0 30 yr coupon -6 bps from yesterday’s close and -6 bps from 9:30 yesterday.
At 1:00 the Treasury auction, the only issue left for the day.
PRICES @ 10:00 AM
10 yr note: -3/32 (9 bp) 1.57% +1 bp
5 yr note: -2/32 (6 bp) 1.15% +1 bp
2 Yr note: unch 0.77% unch
30 yr bond: -6/32 (18 bp) 2.26% +1 bp
Libor Rates: 1 mo 0.519%; 3 mo 0.825%; 6 mo 1.223%; 1 yr 1.526%
30 yr FNMA 3.0 Sept: @9:30 103.64 -8 bp (-8 bp from 9:30 yesterday)
15 yr FNMA 3.0: @9:30 104.73 +3 bp (unch from 9:30 yesterday)
30 yr GNMA 3.0: @9:30 104.55 -6 bp (-6 bp from 9:30 yesterday)
Dollar/Yen: 100.54 +0.09 yen
Dollar/Euro: $1.1292 +$0.0027
Dollar Index: 94.66 -0.11
Gold: $1324.00 -$5.70
Crude Oil: $46.59 -$0.18
DJIA: 18,467.58 -13.90
NASDAQ: 5211.80 -5.90
S&P 500: 2174.16 -1.28