After being gone for a long weekend vacation, which was amazing, TSM has settled back into the work flow and is ready to keep the blog updated on the latest market happenings. Again, and as will be stated in the montly report card, TSM is not a fan of the recent rally - playing the long term fundamentals over short term swings, but clearly there is a rally occuring and, minus a slight pullback this week or so, its likely to continue until earnings are exposed, the plight of the consumer is emphasized to the nation and the hoopla over housing is mitigated for the stabilization it really is and not the growth the media seems to suggest.
WEDNESDAY = Durable Goods Orders at 8:30am; Durable goods orders plunged by -2.5% after an expected decline of only -0.5% and having posted strong positives for the prior two months. The slump in communication goods and transportation goods demand is largely attributable here. Moreover, last month's positive report of a 1.8% increase was revised down to a 1.3% increase.
5 year Note auction at 1pm (it'll be interesting to see if foreign bids/invest are weaker than previous as they were in yesterday's 2 yr auction + given that the government is auctioning off an unprecedented near $200 billion this week; yesterday was $42 billion of 2 years, today is $39 billion of 5 years; tomorrow is $28 billion of 7 years)... and a VERY WEAK auction result this afternoon...foreign investing accounting for only 37% of the bids, as compared to 50 or 60%+ weeks ago. The bid-to-cover ration was less than 2 at 1.92 showing that demand for these longer term financing securities may be waning, particularly from global investors.
WHATS THIS MEAN? The market doesn't like it considering people don't want to finance the stimulus and recovery. Rates are going to rise, which means so will mortgage rates on a housing market that has already seen refis and applications (while improved) start to dwindle as tax credits expire and rates increase. Bad news? or maybe just some reality after what some wise individuals have called the "sugar highs" of July.
THURSDAY = Initial jobless claims at 8:30am (expected job losses of -585,000 after reports of -554,000 last week and -522,000 the week before); And the results were right around expectations of -584,000. The market reacted strongly to this under the assumption that this is the peak. Whether right or wrong will remain to be seen. This report and that assumption are garnering expectations that in the past month only -330,000ish job were lost, as opposed to the -500,000, -600,000 and -700,000 reports we've seen in 2008 4Q and 2009 1Q.
7 year treasury auction at 1pm; This auction was not impressive but was acceptable and average. The big-cover ratio was back above 2 and at a reading of 2.63. Foreign demand resumed. And more than anything, this auction didn't propel fears of financing support dropping off the cliff.
FRIDAY = 2Q GDP initial estimate (of 3) at 8:30am (expected to come in at -0.7% after 1Q 2009's drop of -5.5%); WOW...this report is fascinating to me for so many reasons, so i'm going to devote the next 5 days and 5 blog posts to it and explaining/discussing GDP in general. That being said, the report revised 1Q 2009 GDP decline from -5.5% to -6.4% (4Q 2008 was -6.3%) and had a reading for 2Q 2009 of -1.0% (remember 2 more revisions on that number will come in the next 2 months). Most importantly, consumer demand fell -1.2% after rising 0.6% in 1Q 2009. Remember folks, that affects business inventory restocking (a huge support for recovery) and accounts for 70% of the American economy.
Chicago PMI at 9:45am (This Chicago business barometer is expected to rise from 39.9 to 44.0, which would follow a 5 pt rise last month. Still very low below 50, which indicates a reading of growth/expansion). The Chicago business barometer now reads 43.4. In line with expectations but still below 50.
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