Closing Commentary
Commodities Surge
Oil surged in late trading making a new high at 83.08 behind the upgrade of Tropical Depression Lorenzo to Tropical Storm Lorenzo in early afternoon trade. Oil products shot higher as well with Unleaded tacking on 3.05% on the day, Heating Oil rising 3.16%. The latest update on the storm reports winds of 60mph. Tropical Storm Karen is last reported 990 miles east of the Windward Islands with sustained winds at 65mph, moving east at 12mph.
Gold and silver tacked on more gains today as the dollar languishes near all-time lows against EURO and multi-year lows against Sterling. While today’s housing data came in worse than expected, the dollar was not battered as the market likely leaned on pretty much as expected Q2 final GDP. Grain prices were skyrocketing as well with Wheat up 14.75 cents and Corn up better than 11 cents. Surging worldwide demand (China), massive diversification by hedge funds, the corn/ethanol debate and loss of wheat acreage and the fear of a profoundly weaker U.S. economy are some of the reasons for the sustained bid to commodities.
Today’s Econ Data
2nd Quarter Final GDP came in today as expected at 3.8% but below the 4% previously reported rate. Personal Consumption in the second quarter data came in at expectations at 1.4% and unchanged from the previous report. The GDP price index came in .10% lower than expected at 2.6% and .10 lower than the previous report. Q-O-Q CORE PCE was up 1.4% versus at 1.3% prior reading and against the 1.3% consensus estimate. Initial Jobless Claims for the week ending September 22 came in well below the expected 316k at 298k and 15,000 lower than the revised 313k. New Home Sales for August were reported at 795k, 30k below expectations and 75k below the JULY figure.
US Treasury/ Fixed Income
Treasury Futures were mostly higher after this morning’s data suggested the housing market slump is still in full swing. The FED added 38bln in Repos today taking the lion’s share of collateral in Mortgage Backed Securities as it sought to liquefy the front end with FED FUNDs trading 5 1/16 this morning. The 10 year reversed course slightly today but is still in a longer term downward spiral, helping to push up rates on 30 year fixed, 15 year fixed and 5 year arms and giving lie how a rate cut might help homeowners.
Bear Stearns and Buffet
CNBC reports Buffet is not going to buy a stake in BSC, after which BSC sold off to its worse levels of the day although it did not give back all of yesterday’s gains on the rumor Buffet would take an interest in the beleaguered broker.
Tomorrow’s DATA
U.S. Data for tomorrow includes Personal Income and Spending for AUGUST. Income is expected to have risen 0.4%, as has spending. The August Y-O-Y PCE deflator is expected to have risen 1.7% versus a 2.1% gain last time. CORE M-O-M PCE for August is expected at 0.1%, the Y-O-Y figure is expected at 1.8%.
The Chicago Purchasing Manager’s Index for September is expected to have fallen 0.8 to 53.
August Construction Spending is out at 10am from Commerce and is expected to have dropped 0.3% versus a 0.4% drop in July.
The University of Michigan Consumer Confidence data is also out at 10am and is expected at 84 vs 83.8 last time. (U of Michigan interviews only 500 people, just
10% of the interviews done by the Conference Board).
NAPM Milwaukee is also out at 10am and is expected at 58 versus 63 in AUG.