Good Morning,

The 10 Year Treasury Yield dropped this morning at 1.86%, meaning lower mortgage rates than yesterday, due to the U.S. Budget Sequester taking effect today:

- January 2013 U.S. Personal Income decreased by the most in 20 years with a 3.6% decline (previous month had an increase of 2.6%), coming in worse than market expectations (2.4% decrease). December 2012 U.S. Personal Spending increased by 0.2% (previous month had an increase of 0.1%), meeting market expectations (0.2% increase). This big decrease in Personal Income was partially due to an expected decline due to large number in accelerated dividend payments the previous month. The increase in Personal Spending is due to recent nicreases in gas prices. However, the January increases in payroll taxes also kept personal spending from increasing to desired economic growth levels.

- The February 2013 U.S. Michigan Consumer Confidence Sentiment (final reading) rose to an Index Level of 77.6 (76.3 the previous month), coming in better than market expectations (Index Level of 76.3). The increase in consumer confidence (mostly due to the recent increases in the housing and stock market) might lead to a further increase in consumer spending, which is the biggest factor in U.S. economic growth.

- The February 2013 U.S. ISM (Institute for Supply Management) Manufacturing Index Level rose to 54.2 (53.1 the prior month), coming in better than market expectations (52.4 Index Level). This report shows that U.S. factories increased output in February, which is a sign for U.S. manufacturing growth.

- January 2013 U.S. Construction Spending decreased by 2.1% (1.1% increase the previous month), coming in worse than market expectations (0.5% increase). This increase in construction spending was due to declines in construction spending on new residential properties and government projects.

- Because Congress didn't come to an agreement, The Budget Control Act of 2011 Sequester took effect today, which means $85 billion in across the board government spending cuts taking effect. This should ultimately decrease U.S. budget deficits; however, it would also cut U.S. economic growth, possible putting the U.S. economy back in a recession.

- In China, the Febuary 2013 Chinese Purchasing Managers Index dropped to an Index Level of 50.1 (Index Level of 50.4 the previous month), coming in worse than market expectations (Index Level of 50.5). This report shows that manufacturing levels in China are declining, showing that its economic recovery is still weak.

Here is a sneak preview of the Major U.S. Economic releases for next week:

ISM Services Index (Tuesday), ADP Payroll Company Employment Change (Wednesday), Factory Orders (Wednesday), Fed Beige Book (Wednesday), Weekly Jobless Claims (Thursday), U.S. Trade Balance / Deficit (Thursday), Productivity (Thursday), Consumer Credit (Thursday), Employment Report / Unemployment Rate (Friday), Wholesale Inventories (Friday).