Mel's Blog

Lots of news in store this morning, kicked off by a tame inflation reading via the Personal Consumption Expenditure (PCE) Report.  The important Core Personal Consumption Expenditure (PCE) for July was reported at 0.1%, which was less than expectations of 0.2%.  This tame reading leaves the closely watched year-over-year Core PCE at 1.9%, and still within the Fed's target zone of 1 - 2%.  Even though tame inflation news is always welcome for Bonds - this headline caused Stocks to rocket strongly higher, as this further supports the possibility of a rate cut by the Fed.  The charge higher in Stocks took the wind out of the sails for Bonds, which are being pressured lower at the present time.  

Embedded in the PCE report was Personal Income for July, which rose to its best level since March with a 0.5% increase, while Personal Spending increased by 0.4% - both exceeding expectations.  The Personal Savings rate improved to 0.7%, from June's reading of 0.6%.

The Chicago Purchasing Manager’s Index (PMI) for August came in very close to expectations.  The University of Michigan ’s Revised Consumer Sentiment Index for August was also right in line with expectations.  

Fed Chair Ben Bernanke is currently in the midst of a speech many analysts are hoping will address the Fed’s near term economic outlook and policy risks, and provide some clear clues as to the Fed's next move.  But it already appears unlikely that the Fed will telegraph a clear direction ahead of the Jobs number and with almost 3 weeks before the next Fed meeting to see how the credit situation plays out.  Stocks may move off their early highs, after realizing they are not getting the certainty of a cut from Uncle Ben.  That said - and as the debate rages on - we remain in the same camp we have been in...it looks like a cut to us. 

At 11:10am ET President Bush is going to present several proposals to aid borrowers hardest hit by mortgage problems.  Bush will propose programs and reforms to come to the aid of those who are struggling with their sub-prime and adjustable rate mortgages so they won’t default on their loans and lose their homes.  Any proposed government bailout for struggling homeowners will have to work its way through Congress and the price tag for the US taxpayer could be huge.