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Market Update for Monday 11-28-2011

Monday, November 28, 2011 - Article by: Crestico Funding - Message

Markets had a shortened day on Friday, normally not likely to make huge moves but the bond market saw selling on increased optimism that Europe is on the path to coming up with a "plan". More likely Treasury prices fell on increasing optimism that Holiday shopping would exceed estimates that were saying sales would be less than last year. The 10-Year Note fell 24/32 on Friday to 1.97% +9 bp, mortgage prices down 6/32 (.18 bp) frm Wednesday's close. Friday the stock indexes were lower, -26 on the DJIA -19 on the NASDAQ and -3 on the S&P 500 index.
For the first time in 11 days U.S. equity futures, commodities and the Euro advanced as European leaders drafted a fremework for the region's bailout and American's Thanksgiving Retil Sales jumped to a record, up 16%. The cost of insuring against default on European government debt fell for the first time in eight days. Europe's bailout fund may insure bonds of debt-stricken countries with guarantees of 20% to 30%, depending on financial markets, accourding to guidelines that finance ministers eill discuss this week.
This morning the stock market is opening strong; at 9:00 the DJIA futures traded +267 with the other key indexes also up in optimism over retail sales and less pessimism over Europe. All key markets in Europe were trading higher adding more strength to U.S. markets. At 9:30am the DJIA opened +250, the 10-Year Note at 9:30am -28/32 at 2.06% +9 bp from Friday, mortgage prices -7/32 (.22 bp).
U.S. interest rates fell last week but not much; the 10-Year Note declined 4 bp and mortgage prices were unchanged. Last week the DJIA took a 565 point hit.
Will the Federal Reserve renew buying MBSs? News reports this morning saying the biggest primary dealers are saying the Federal Reserve may buy as much as another $545B of MBSs next quarter. 16 of the 21 primary dealers of U.S.
At 10:00am October New Home Sales were expected to be -0.3%; as reported sales increased 1.3% to 307K annualized sales. The inventory remained unchanged at 6.2 months. September sales originally +5.7% was revised to +3.4%.
This week markets do have a number of significant economic releases capped on Friday with the November Employment Report.

This Week's Economic Calendar:
11/28: 1000am - October New Home Sales
11/29: 0900am - September Case/Shiller 20 city index (-3.0%)
10:00am - November Consumer Confidence Index (43.0 frm 39.80)
FHFA Sept price index (unch frm August which was down 0.1%)
11/30: 0700am - Weekly MBA mortgage Applications (N/A)
0815am - ADP November Private Jobs (+125k)
0830am - Q3 Productivity (+2.6% from +3.1%)
Q3 Unit Labor Cost (-2.1% from -2.4%0
0945am - Chicago Purchasing Managers November Index (59.0 from 58.4 in October)
1000am - September Pending Home Sales
0200pm - Federal Reserve Beige Book
12/01: 0830am - Weekly Jobless Claims (-3k to 390k)
1000am - November ISM Manufacturing Index (51.5 from 50.8)
October Construction Spending (-0.2%)
0300pm - November Auto & Truck Sales (n/a)
12/02: 0830am - November Employment Report (Non-Farm Jobs -118k, Non-Farm Private Jobs
+150k, Employment Rate unchanged at 9.0%)

The 10 yr note continues to find resistance when it falls below 2.00%, to push rates lower it will take defaults in Europe that will lead to an increase in sentiment that the economy will slide back as Europe enters recession.

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