The market has taken a moment to catch its breath, dipping in consolidative fashion on both stocks and bonds. Stocks are feeling the effects of last Thursday’s sour payroll numbers, currently off 35 points on the big board. Perception has turned on a dime from one of “green shoots” in a stabilizing economy to one of a more drawn out recession/recovery.

Second quarter earnings season kicks off Wednesday with Alcoa and really shifts a gear next week. Top line growth, or the lack of it, will be all the talk. Bonds, notes, and mortgage backs will have supply to contend with this week. 73 billion of 3’s, 10’s and 30’s will hit the tape beginning tomorrow. Currently, the 10 year note is off 10/32’s (yield 3.53%) while mortgage backs are down 3/32’s. The only data out today was the ISM (Institute for Supply Management) non-manufacturing index which rose 4.2 points to 48.6. The surprise came in the employment index component which rose 4 points.

Overall, 50 is the neutral number with readings below signaling contraction and above points to growth. Technically, the activity today has centered around the high volume mark (yield 3.52%). The failure to rally (lower yields) has been buffeted by good support just below the market (holding). This is a good sign that the market is comfortable with current “value”. Buyers have the edge, even with supply in their face. Let’s call the market neutral with an edge to the bulls. Light news week ahead “should” keep the market quiet. Stocks and the auctions will spark the volatility. We’ll keep you in the loop.