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.