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Market Update Stocks are higher and Mortgage Bonds are lower so far this morning

Stocks are higher and Mortgage Bonds are lower so far this morning.  Initial Jobless Claims for the week ending 11/1 were reported at 278k.  This was better than expectations of 283k, and represented a drop of 10,000 from last week’s number, which was revised slightly higher from 287k to 288k.  This was the second lowest number of the recovery, bringing the 4 week moving average of Claims down to its lowest level in 14 years at 279k.  Overall, Claims continue to show strength in the Jobs market.


Productivity was also reported, up 2% for the 3rd quarter.  This was a good number, and helps to keep already low inflation tame.  The Fed would actually like to see a move up in inflation, towards their 2% target.

Technicals will take a backseat to tomorrows Bureau of Labor Statistics Jobs Report, but they are not favorable for Mortgage Bonds.  After closing near all-time highs yesterday, the S&P 500 looks like it is going to make a run higher today.  Mortgage Bonds have been pushed lower off of the 25-day Moving Average and are now in the middle of a range between overhead resistance at the aforementioned 25-day and support at the 50-day Moving Average.  The 10-year Treasury Note Yield has moved higher off of its 25-day MA and appears headed towards the 2.41% level.

Jobs Report Strategy

Last month’s numbers: 248,000 new jobs, 5.9% Unemployment Rate

Market expectations: 240,000 new jobs, 5.9% Unemployment Rate

We are going to advise locking ahead of tomorrow’s Jobs Report.  Yesterday, we saw a strong ADP number at 230k.  And over the last several months, there has been less of a disparity between the ADP and BLS reports, averaging 20k or so.  If this were to hold true, we should see a strong number tomorrow.  Additionally, the Initial Jobless Claims figure used in the sample week for the Jobs figures came in at 283k, which would support a Jobs number well over 200k.  A good Jobs number tomorrow will help the Stock market improve and cause a sell off in Bonds.  The estimates are somewhat high, but in order for the Bond market to improve we would have to see a big miss, and all of our signals are pointing towards a decent number.  For this reasons, we think the risks favor locking ahead of the Jobs Report.

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About PhilJawny

Award winning mortgage banker with over 14 years of experience.

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