ECONOMIC WEEK AHEAD: October 5-9

Most of last week's economic indicator reports were strong: Initial jobless claims fell to near a 57-year low, ADP private payrolls rose 90,000 in September, and the ISM M-PMI was in expansion for a ninth straight month. Friday's employment report was the exception. Nonfarm payrolls rose just 29,000 in September, well below expectations, while July and August were revised down by a combined 60,000. The unemployment rate edged up to 4.2%.

Odds of a 25bps hike in the federal funds rate (FFR) at the October 27-28 FOMC meeting fell to 22%, with odds of one at the December meeting at 67%. Odds of two hikes by December is at just 3%. In other words, the market still expects a rate hike this year, though it has all but ruled out two. However, we still think the Fed ought to hike at least enough to reverse last year's three 25bps "insurance" cuts. September's hike reversed one, which leaves two more to go.