Daily Clueless Musings 2/28

We are heading into a data heavy week. ADP, Humphrey Hawkins and nonfarm payroll are all expected this week. The January reading of Personal Income is better than expected, up 1%. While spending rose less than expected. So are US consumers finally saving? The reality should be read as government largesse boosted personal income but failed to stimulate consumption. Reduced employee contributions for government social insurance, which reflected provisions of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, boosted personal income in January by reducing the employee social security contribution rates. Excluding these two special factors, disposable income only increased 0.1 percent in January. Chicago ISM jumped to its highest reading since 1988. Cost inflation continues. Energy, steel and cotton are all on the rise. Interest rate came in and yield curve flattened before Humphrey Hawkins. The text of Bernanke's remarks may have nothing new from last FOMC (slightly better economy, weak job market and low inflation), though at least the Q&A may be a little more interesting.I think Ben will be asked tough questions regarding rising commodity prices and Fed’s playbook of dealing with it. Market is expecting a rather dovish Fed. Dollar also lost its ground against other major currencies, even when newly elected Irish government is trying to renegotiate the "bailout". Volatility is relatively firm before the Humphrey Hawkins and Nonfarm payroll and vol path generally under performed the skew.