Weekly jobless claims was the first report this morning. Claims were expected to have increased 10K to265K, as reported claims increased 3K to 259K. The smoother 4 week average continues to decline; 263.25K frm 265K last week. Claims are hanging near 42 year lows.
 News frm the ECB meeting trickling out early today; Draghi saying the bank will continue to assess its policies to counter the effects of slowing emerging markets that are dragging the EU down. He suggested the EU likely will need increased monetary stimulus; markets taking that as a move in Dec. “Concerns over growth prospects in emerging markets and possible repercussions for the economy from developments in commodity markets signal downside risks to the outlook for growth and inflation,” Draghi said. The bank let interest rates unchanged at the meeting, at 0.05% and the deposit rate at -0.2%. The ECB is currently buying €60B a month ($67B). Rates declined on Draghi’s comments; the German 2 yr note yield down three basis points to 0.03% to a minus 0.29%. 

 At 9:00 the August FHFA home price index, expected to have increased 0.5%, increased just 0.3%. Yr/yr the index is up 5.5%, down frm July’s yr/yr at 5.8%. More confusion; other recent indications and reports on the housing sector have implied increasing prices, the exception has been Case/Shiller; this data lines up with recent data frm Case/Shiller’s reports. Not a market mover. 

 Even before the stock market opened this morning the MBS market was volatile, very early prices opened down as much as 20 bps, then in a very thinly traded market the prices jumped back to unchanged by 9:00 am. The 10 yr note, on comments frm Mario Draghi, edged closer to 2.00%, at 2.02% at 9:00. The DJIA opened +129, NASDAQ +35, S&P +14. The 10 slipped back to unchanged at 2.03%; 30 yr FNMA 3.5 coupon -2 bps frm yesterday’s close and unchanged frm 9:30 yesterday. 

 Two key reports at 10:00 am; Sept existing home sales up 4.7%, better than +1.0% expected. Annual sales up 8.8% yr/yr. Inventories -3.0% yr/yr, the median sales price $221,900 +6.1% yr/yr. August sales were revised slightly lower by 100K. Sept leading economic indicators were expected 0.0% as reported declined 0.2%, August indicators revised from +0.1% to 0.0%, the decline was the second this year, the other hit in Feb. LEI is a composite index of ten economic indicators that should lead overall economic activity, but recently traders have put less emphasis on it. 

Stocks rallying the bond and mortgage markets flat-lining recently. Same story, we do not want to float, taking long position in the bond or mortgage markets until the 10 can break below 2.00%. We continue to believe rates will decline more but until the market actually meets our expectations we think the best approach now is to keep locked. There is little reward here but increased risk that prices could decline at these levels; we will float to begin though. 

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Wednesday marked the end of the third quarter -- the end of a brutal quarter. Oil futures finished lower on Wednesday. Oil was down 24 percent in the third quarter. Prices based on the most active contracts are trading 15 percent lower year to date. Most of the concern with oil is in the build-up of supplies. The latest U.S. Energy Information Administration report posted an increase in the U.S. supply and also a small drop in U.S. oil production.
 
Another commodity having a rough year is gold. Gold futures were down 4.8 percent in the third quarter. There are a number of factors working against gold. ADP showed that U.S. companies added 200,000 private-sector jobs in September, better than expected. As positive economic news comes out, the better the chances that the Federal Reserve will raise interest rates, which would be good for the U.S. dollar and bad for gold. A strong U.S. dollar is bad for gold prices, as well as with a number of other commodities. Gold finished the quarter at $1,115.20 an ounce on Comex, the lowest closing price in more than two weeks. Silver was down 6.8 percent for the quarter, closing at $14.518 an ounce. Platinum closed Wednesday at $907.20 an ounce for October. This marks a 25 percent decrease year to date. Copper has fallen 17 percent year to date and closed at $2.341 a pound.
 
Despite the stock market woes and global worries, Consumer Confidence in the U.S. grew in September. A survey of consumer confidence showed an increase in September to a level or 103.0. That is up from the August level of 101.1. The Present Situation Index, which is a measure of current conditions, climbed to an eight year high. It’s not all positive, however. The Future expectations Index fell from 91.6 to 91.0. This indicates that U.S. consumers do not see growth picking up in the near future. While consumers are feeling pretty good right now, there are still a lot of signs that show that the economy has a long way to go to fully recover. Annual growth in the U.S. has not reached 3 percent since 2005 and more than 16 million people who would like a full-time job cannot find one. There is good news, as well. Hiring is strong, job openings are at an all-time high, and there are some signs that wages are starting to increase as the unemployment rate shrinks.
 
The stock market got some positive news from China on Thursday. Chinese manufacturing numbers were stronger than expected. Unfortunately, the U.S. manufacturing numbers were not as positive. The Institute for Supply Management reported its Manufacturing Index dropped from 51.1 percent in August to 50.2 percent in September. The stronger dollar, along with a weaker global economy, are hurting U.S. exports.
 
Two other reports came out this week with concerning news. Jobless Claims increased last week to 277,000 -- up 10,000 from the previous week. Although this is the highest number of new claims in a month, the weekly average for the year is the lowest since the early 1970s. The news got worse Friday morning as the Non-Farm Payrolls rose by 142,000 in September -- missing expectations of a gain of 200,000 jobs. In addition, the August numbers were revised sharply lower to an increase of 136,000. It is believed that hiring in the U.S. has slowed due to the weakening global economy. This news sent the stock market lower. This may lead the Fed to delay an increase in interest rates.
 
In other news, U.S. house prices rose .6 percent in July. Cities in the west; such as, Portland and San Diego led the increase. Consumer Spending was higher in August. New automobile sales and strong back-to-school sales were driving factors in the increase.
 
This week we having the following reports coming out:
 

• Monday -- ISM Nonmanufacturing Index
• Tuesday -- Trade Deficit
• Wednesday -- Consumer Credit
• Thursday -- Weekly Jobless Claims and FOMC Minutes
• Friday - Import Price Index and Wholesale Inventories
   

Have a good week and thank you for your business.