Credit Regains Momentum

Just as the credit market was starting to lose momentum, along came the tech sector. Late last week, strong earnings from  Research in Motion  (RIMM), better-than-expected earnings and increased guidance from  Oracle (ORCL, rating: AA), and word that  Texas Instruments (TXN) is increasing its dividend and share-buyback program offset mixed economic news earlier in the week. The markets had been waiting for some positive news, and this filled the bill. The Morningstar Corporate Bond Index tightened 3 basis points from the prior week to +161.

Economic releases were mixed last week, as the reported headlines masked worrying underlying trends. Prior-month downward revisions made the numbers look better than they actually were. For example, retail sales topped expectations for August, increasing 0.4% month over month. However, the better-than-expected release was a result of a revision for July sales to 0.3% from 0.4%.