Daily Market Commentary for September 1, 2011

Fed Governor Elizabeth Duke says changes should be made to HARP - to enable the participation of millions more underwater borrowers. (read more at Millennium-Traders.Com) http://www.millennium-traders.com/news/newscommentary.aspx

U.S. stocks buoyed between minor losses vs. minor gains as investors held onto the sidelines ahead of monthly jobs reports scheduled out tomorrow. Additionally, many traders have already headed out for an extended holiday weekend - with the upcoming Labor Day holiday on Monday that will close the U.S. markets in observance.

The White House reported yesterday that President Barack Obama would delay his address to Congress outlining jobs proposals, by one day. Obama had intended to make his speech Wednesday, September 7, but House Speaker John Boehner called on the President to delay the speech until Thursday. A Wednesday slot would have conflicted with a Republican presidential debate, while the new time conflicts with the opening game of the National Football League season with New Orleans at Green Bay.

Labor Department reported the number of Americans seeking new jobless benefits fell last week, but remained at a level associated with slow hiring trends. New applications for unemployment compensation dropped 12,000 to 409,000 in week ended August 27. Initial claims from two weeks ago were revised up to 421,000 from an original reading of 417,000. The average of new claims over the past four weeks rose by 1,750 to 410,250 with the monthly average seen as more accurate gauge of labor trends because it smoothes out volatility in the week-to-week data. With weekly applications for jobless benefits hovering above 400,000 throughout almost the entire year, this reflects little change in our weak U.S. labor market. The number of Americans who continue to receive regular state unemployment checks decreased by 18,000 to 3.74 million in week ended August 20 with continuing claims reported with a one-week lag. Newly revised data for U.S. productivity fell by 0.7% in Q2 instead of by 0.3% as initially reported last month. The government also said productivity of U.S. businesses and workers in the second quarterQ2 fell more sharply than originally reported. Worsening productivity stemmed mainly from higher costs for labor. Unit-labor costs jumped by an annual rate of 3.3% in Q2, up from an initial estimate of 2.2% and Output of goods and services rose just 1.3%, not 1.8% as originally stated. A decline in productivity usually is a bad sign for an economy with higher productivity typically leading to higher pay for workers and more profits for business.

Commerce Department reported Outlays for U.S. construction projects fell 1.3% in July striking the largest decline since January. The sharp drop during July was offset by a sharp upward revisions to May and June. Outlays are up 0.1% compared to 2010. Spending on private construction fell 0.9% after a 2.0% gain in June and residential construction fell 1.4% after a 1.1% gain in June. Non-residential construction fell 0.4% after five straight monthly increases. Spending on public projects fell 2.1% during July after rising 0.8% in June. Public construction is at its lowest level since December 2006.

Institute for Supply Management reported manufacturing activity grew in August, but at the slowest rate since July 2009. The index slipped 0.3 points to 50.6%, as new orders and production fell. Activity has expanded or been above 50%, for 25 straight months.

Freddie Mac reported as weak economic data persist, mortgage rates remained near record lows in week ending September 1. The average rate on the 30-year fixed-rate mortgage remained at 4.22%, matching the prior week's rate and close to a record low of 4.15%. "Weaker economic data reports eased upward pressure on mortgage rates this week and kept them at or near all-time record lows. Recently released data on the housing market also showed less strength as well," said Frank Nothaft, Freddie Mac's chief economist, in a statement. The average rate on the 15-year fixed-rate mortgage declined to 3.39% in the latest week, down from 3.44% in the prior week. The 5-year Treasury-indexed hybrid adjustable-rate mortgage hit a record low of 2.96% in the latest week, down from 3.07% in the prior week. The 1-year Treasury-indexed ARM declined to 2.89% from 2.93%.


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