Weekly Market Preview, What’s on the agenda for this week?

Weekly Market Preview

What’s on the agenda for this week?

The global equity markets continued their sell-offs today. China leading the way down just as it led global equity markets higher from 2009. China trying to stop the decline in its markets reduced bank reserves to increase lending; a fool’s attempt to stop their markets and economy frm declining more. The infection began to spread globally two weeks ago when China surprised the world by de-valuing its yuan. Treasuries gaining as investors seek the relative safety of government bonds, today feeding into MBSs after Friday’s rather subdued improvement in MBS prices. This is the major correction we have been expecting for over a month now, having no idea when it would happen. US and global markets were very over-valued, trading on central bank market manipulations for the last five years. Now it is panic in equities as the reality has set in rapidly. Global economic growth, even with the central banks running printing presses at warp speed, cannot override reality that growth hasn’t been as strong as the headlines had been indicated.

This is the natural and unavoidable aftereffect of a global liquidity bubble brought on by central banks the world’s main central banks. Over the last few months the data reported didn’t faze central bankers, especially our Fed; we have noted before the central banks were treading on ground they had no idea how it would play out; there has not been a condition like this since the depression. With all of those platitudes frm almost every US Fed officials, it was just hoping and guessing but eventually reality always come to the top of the boiling pot. There are numerous thoughts floating around over the last week about why the collapse of equity markets. Let’s not make too much out of it trying to figure it out looking at all of the “rationale” being spewed now; no matter how deep you go in divining the reality, all we need to realize is that the economies of the world are not nearly as strong as those headlines that investors put huge faith in. Numerous examples floating now; the one that has always been crap to us; the unemployment data. Unemployment has been touted by Wall Street and brokerages and economists and analysts and cab drivers as evidence of economic growth, the fact is jobs have increased but quality stinks—and most everything feeds frm there. Another way to look at what is going on now and last week in equity markets; all of them were over-bought based on current earnings and future outlooks. This is the correction well overdue.

At 9:30 the DJIA opened down 985, NASDAQ -367, S&P -95. The 10 10 yr note yield at 1.91% -13 bps frm Friday’s close; 30 yr MBS price +56 bps frm Friday’s close and +62 bps frm 9:30 Friday. Within 10 minutes of the open stock indexes in an extremely volatile trade jumped 100 points frm the low at the open, NASDAQ also came off its low and jumped a 100 points. Today will be very volatile, look at the 10:15 prices below, how indexes have come well off their panic lows at the open.

Expect volatility today and through the rest of the week. Already today the 10 yr note yield range, the low at 1.90% the high 1.99%. MBS price at its best up 56 bps, but the price has dropped back to +25 bps. Floating today and through the week should not be taken easily, if you are looking for good rates and prices and floating it won’t be without a lot of angst.

This Week’s Economic calendar:
Tuesday,

– 9:00 am June Case/Shiller 20 city (yr/yr +5.2% frm 4.9% in May)
– – June FHFA home price index (+0.4%)
– 10:00 am July new home sales (+6.6% to 516K units)
– – August consumer confidence (94.0 frm 90.9)
Wednesday,
– 7:00 am weekly MBA mortgage applications
– 8:30 am July durable goods orders (-0.4%, ex-transportation orders +0.4%)
Thursday,
– 8:30 am weekly jobless claims (-7K to 270K)
– – Q-2 prelim. GDP (+3.2% frm +2.3% frm advance report last month)
– 10:00 am July pending home sales (+1.0%)
Friday,
– 8:30 am July personal income and spending (income +0.4%, spending +0.4%)
– – July personal consumption expenditures (core +0.1%)
– 10:00 am Aug final U. of Michigan consumer sentiment (93.3 frm 92.9)
– – Jackson Hole Symposium begins today

PRICES @ 10:15 AM

10 yr note: +22/32 (69 bp) 1.96% -10 bp (low today 1.90%)

5 yr note: +13/32 (41 bp) 1.34% -9 bp

2 Yr note: +4/32 (12 bp) 0.56% -5 bp

30 yr bond: +34/32 (103 bp) 2.68% -6 bp

Libor Rates: 1 mo 0.199%;3 mo 0.329%; 6 mo 0.529%; 1 yr 0.847%

30 yr FNMA 3.5 Sept: @9:30 104.66 +56 bp (+62 bp frm 9:30 Friday)

15 yr FNMA 3.0 Sept: @9:30 104.09 +16 bp (+13 bp frm 9:30 Friday)

30 yr GNMA 3.5 Sept: @9:30 104.70 +41 bp (+40 bp frm 9:30 Friday)

Dollar/Yen: 118.46 -3.85 yen (dollar weakening rapidly these days)

Dollar/Euro: $1.1593 +$0.0207 (ditto above)

Gold: $1,164.70 +$5.10

Crude Oil: $38.26 -$2.19

DJIA: 15,979.45 -480.30 (-1,000 on the opening)

NASDAQ: 4548.30 -157.74 (-367 on the open)

S&P 500: 1909.92 -60.97 (-95 on the open)

 

 

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