At 10:00 the Feb ISM services sector index, expected at 53.5 from 54.0, the index fell to 51.6 the weakest reading since Feb 2010. The service sector has been the driver for job growth in the last year, the weak report will likely be blamed on the weather but the ISM manufacturing index released last week was stronger than markets were expecting. The employment component in the service sector declined below the pivot 50 level to 47.5 from 56.4 in Jan but the new orders component did however increase to 53 from 51.9. The initial reaction wasn't much; prior to the 10:00 report the DJIA was down 10 and didn't change, the 10 yield at 2.71% unchanged from earlier, 30 yr MBS price did improve slightly by 6 bps.

Interest rates when viewed a wider basis have been relatively flat for three weeks after taking away the 24 hour reaction to the Russia/Ukraine developments. The 10 yr note has been tied between 2.77% and 2.70% for most of the time since the beginning of Feb. MBS prices swinging in a 100 basis point price range and 6 bps in rates. Most investors and economists still holding to the view that the underlying economy is a better than what most of the weaker data has suggested. Recent reports have been mixed; consumer sentiment better, new home sales strong, the ISM manufacturing index better than estimates but the employment sector still weak. It is difficult to change investors outlook that the economy is better than any of the weak data reported that won't change until we see data for March which won't be available for another few weeks. Whether the economy is growing or stalling can be debated but presently the economic outlook is decidedly bullish.

Employment on Friday; expected markets to remain in narrow ranges until then. Nothing is expected from the Ukraine; technically still holding very minor positive readings on the 10 and MBSs. Best to keep locked through the employment report.