Forecast for the week June 08,2009

In terms of economic reports, Thursday will be the big day this coming week. We'll learn more about the health of the retail sector via the Retail Sales Report for May. April's Retail Sales Report was worse than expected and marked the eighth decline in the past ten months for Retail Sales. While May's Report isn't expected to show the consumer out spending wildly, it would be a positive sign to see a turnaround instead of a continued slide lower.

Also on Thursday will be the next Initial Jobless Claims Report. Particularly given the high Unemployment Rate in last week's Jobs Report, it will be important to see if this number shows any improvement.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

Bonds have traded lower recently, causing home loan rates to move higher. The reasons are many, but certainly due in part to all the extra Bond supply in the market. The Treasury has to have some way to pay for all the massive government stimulus plans, so Treasury auctions have been increasing dramatically - but the added supply is driving prices lower, with home loan rates moving higher. I will be watching closely to see if this trend continues.
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