Weekly Preview - February 8, 2010

Last Week; was another volatile week with little change in interest rates or on the stock market's key indexes. The second week in a row that didn't generate change; but the road  last week was anything but smooth. The stock market rallied Monday and Tuesday, fell off Wednesday and Thursday then ended Friday with not much change; on the week the DJIA -55, NASDAQ -6 and the S&P -8. The bond and mortgage markets were equally choppy with no significant change in rates in treasuries or mortgages. The employment report dominated trade last week; once again the headlines don't accurately reflect the true state of unemployment. 9.7% unemployed in Jan with non-farm job losses of 20K. The decline in the overall unemployment rate is due to potential workers giving up looking for work. BLS did their annual revisions to the employment data covering the period from April 2008 to March 2009 and added another 1.2 mil lost jobs in that period. No matter the talk, no matter the political spin, jobs continue to decline albeit at a slower pace, and the likelihood of job growth of any significance is nil. Consumers continue to slow spending; Dec consumer credit fell again by $1.73B, less than expected but the 11th month in a row consumer credit has declined.
 
This Week; not much economic data to work from; retail sales for Jan and weekly jobless claims both on Thursday is all there is of consequence. This week Treasury will auction $81B of notes and bonds on Tuesday, Wednesday and Thursday to borrow money to fund the growing federal budget deficit. Generally auctions have a negative influence on the interest rate markets but so far Treasury borrowing has met good demand. As has been the case for a month now, the rate markets are guided each day by how the stock market does; most continue to look for more correction but also see pullbacks as opportunities to add more to their portfolio. Potential sovereign debt defaults rocked markets last week coming from Greece, Portugal and Spain with fears more countries may be moving to the edge on their debt. Given the relativity to other countries the U.S. is in no danger of losing its Aaa debt rating even though the Obama administration has predicted a $1.6 trillion budget deficit in 2010 and another $1.4T in 2011. May not loose the high rating but eventually the cost of borrowing will increase.

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