Thursday's bond market has opened in positive territory following early stock weakness. The stock markets are giving back some of yesterday's late gains with the Dow down 90 points and the Nasdaq down 19 points. The bond market is currently up 8/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.
Today's release of the 4th Quarter Employment Cost Index (ECI) showed an increase of 0.8% that matched analysts' forecasts. This made the data fairly irrelevant to the markets and has not affected mortgage rates this morning.
January's Personal Income and Outlays report was also posted this morning. It showed that income rose 0.5% while spending increase 0.2% last month. Both of these readings were slightly higher than expected and can be considered bad news for bonds and mortgage rates. Fortunately though, the market appears to be gearing more towards tomorrow's releases than this data.
Also worth noting was a huge spike in weekly unemployment claims. This data is usually not looked at closely since it tracks only a week's worth of claims, but the jump did bring attention to it. The weekly release was expected to show that 320,000 new claims were filed last week, but actually posted 375,000 new claims. This was not expected and brings it close to the important benc hmark of 400,000. While one week's worth of claims is not considered reliable, I will bet that traders will be watching next week's posting very carefully.
There are three reports scheduled for release Friday and two of them are very important. The first is by far the most important of the three. The Labor Department will post January's Employment data early Friday morning, giving us the U.S. unemployment rate and the number of jobs added or lost during the month, among other related statistics. Analysts are expecting to see the unemployment rate remain at 5.0% and approximately 70,000 new jobs. An increase in unemployment and fewer new jobs than expected would be great news for the bond market. It would probably create a bond market rally, leading to lower mortgage rates Friday.
We will figure it out tomorrow...
mac
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