Stocks are lower this morning on no real news. Bonds and MBS are up.
We have some important data this week, with construction spending, the ISM data and the jobs report on Friday. The market is forecasting a jump in wage inflation and that will be the number everyone is going to focus on.
Personal Spending rose 0.4% and Personal Income rose 0.3% in August. Inflation came in at 0.1% month-over-month and up 1.3% year-over-year.
Pending Home Sales fell 1.4% in August, but are up 6.7% year-over-year.
The Dallas Fed Manufacturing Index came in less negative than forecast.
On Friday, Speaker of the House John Boehner announced he was resigning. At the margin, it probably means a clean continuing resolution (in other words, no government shutdown). This isn’t going to matter to the markets one way or another – they recognize government shutdowns and debt ceiling fights as what they are: a chance for politicians to posture, and otherwise something to ignore.
The favorite to replace Boehner is Kevin McCarthy from California.
Speaking of government shutdowns and the debt ceiling, it does have an effect on the bond markets. The debt ceiling’s proximity means the government has to issue less T-bills than it ordinarily would, which makes them scarce and therefore they have ultra-low interest rates. This is bad news for money market funds and other savers. That said, ZIRP is the primary reason the issue.
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