Weekly Information 7/30

The end of July usually marks the quietest time of the year for markets, but not this year. The slowdown beginning in May is now more trend than air-pocket, and every new data point matters. This morning’s news of sub-par 2nd Quarter GDP (+2.4%, half by inventory accumulation) has helped bonds and mortgages, pushing the 10-year T-note back down in the 2.90s. On Monday jumpy markets whipsawed after “New home sales soared 24% in June!” turned out to be a minor bounce from a deeper hole, May revised to a 53% drop from April. At mid-week, the MBA reported new mortgage applications still flat last week, and new claims for unemployment insurance fell 11,000, but are still running 450,000 weekly, where they've been stuck all year. June orders for durable goods were forecast to rise .5% (core), but fell .6%. The Conference Board’s index of consumer confidence plunked to 50.4; in prior recoveries it has averaged over 100, and at bottoms of prior recessions, 72. The Fed’s July “beige book” was distinctly softer than June, but had a public relations overtone, insisting that economic activity continued to “increase.” There is a great deal riding on Monday's ISM survey (the Chcago area had a big upward move, released today, which put a floor under stocks after the GDP data), and the gorilla for every month, next Friday's release of July payrolls. The bond market is pricing for a double-dip back to negative GDP, or close enough to get the Fed back in the game as a bond buyer -- the payroll data alone has the power to confirm weakness and take rates into the lower fours, or to blow us up.