Morning Report: Optimism remains in short supply

Vital Statistics:

	Last	Change
S&P Futures	2152.8	-6.0
Eurostoxx Index	342.3	0.3
Oil (WTI)	51.0	-0.3
US dollar index	87.9	0.3
10 Year Govt Bond Yield	1.77%
Current Coupon Fannie Mae TBA	103.3
Current Coupon Ginnie Mae TBA	104.2
30 Year Fixed Rate Mortgage	3.54

Stocks are up small on no real news. Bonds and MBS are down. 

Alcoa kicked off Q3 earnings season with a miss. Earnings season gets into full swing next week when all the big banks announce. 

While bond yields rose pretty dramatically during September, there are still $10.7 trillion worth of negative bond yields worldwide. Half of it is from Japan. The German Bund is now trading at a yield of 6 basis points.  A years' interest on a 1 million euro Bund would cover one night at the Bayerische Hof hotel in Munich. Happy Oktoberfest.

Small business optimism dipped in September, according to the NFIB. Sentiment came in at 94.1, well below the historical 98 average. The bright spot was an improvement in economic expectations (basically improving to neutrality) while job openings and inventories fell. Small business is also firmly in maintenance capital expenditure mode, choosing not to deploy capital for expansion. The election is probably having a negative effect on sentiment as well. 

Meanwhile, the US economic confidence index continues to languish in negative territory. Historically, you would see a jump in confidence around election times, as candidates promise to make things better. Not this time around, however. This also makes the Fed's job more perilous, as they don't want to depress what little animal spirits are out there at the moment. 

Tim Duy argues that Friday's jobs report is bad news for Fed hawks who want a December tightening. He sees November as a long shot, and December as not a foregone conclusion. Lots of wonky labor economics, but he does give you a good idea on how the Fed thinks. 

Goldman is out with a "be cautious" call for the rest of the year. A vulnerable European economy, combined with high US stock prices means the market could be looking at a 2% decline over the next couple of months.