This week is one big week for the markets. Since Sept 21st at the conclusion of the FOMC meeting when the Fed announced it was prepared to buy more treasuries the bond and mortgage markets have had a yo-yo ride. On the announcement it set up a big move lower in rates taking the 10 yr down 40 basis points, then markets began to see an easing move as a step to increase inflation and the bond and mortgage markets turned and now sit about where interest rates were prior to the FOMC meeting. On Wednesday the FOMC will actually announce what the Fed intends. Unless there is some form of shock and awe the Fed's easing move may simply be another failed attempt to revive the housing markets and the economy.
Economic data ends the week with the employment report on Friday. In the meantime the data calendar has key data ;points everyday this week except Tuesday, election day. The election is the least of the issues this week as there is little doubt Republicans will take the House but likely not the Senate. Talk of grid-lock with the change in Congress; normally considered good, grid-lock this time is something to avoid with the economy barely holding on. Nothing expected from the elections until January when the new Congress gets underway, in the meantime the lame duck Congress is all about scrambling the eggs. Extending the tax cuts coming at the end of the year is the main event.
Difficult to predict how the bond market will take the FOMC policy statement on Wednesday, in the meantime the rate markets will likely stay about where they are. Friday's Oct employment report is expected with just 60K non-farm private job growth and the unemployment rate unchanged at 9.6%. Unless job growth exceeds 100K a month it doesn't even cover the new entries in the job market let alone those that have lost jobs in the recession.
