Weekly jobless claims out this morning at 8:30; claims were widely expected to have declined 20K to 25K, as reported claims fell 42K to 346K. Last week claims increased 28K, more than was expected at the time. The last two weeks of claims appear to have been to smooth out swings due to the Easter holiday that falls at different times each month. Nevertheless the claims recently have exhibited an increase in volatility. Mix in the March employment report that was exceptionally soft on job creation (+88K) and markets are left scratching heads as to the reality of the employment data recently. The reaction in the markets to the better claims was almost nil; stock indexes little changed and the 10 yr note a little better.
March import prices were reported -0.5%, export prices -0.4%; yr/yr import prices own 2.7% while yr/yr export prices +0.3%. Not much direct interest in the monthly report frm traders but the data shows imports falling primarily on lower oil prices and a stronger dollar.
At 9:30 the DJIA opened unchanged from yesterday, NASDAQ -7, S&P unchanged. The 10 yr note at 1.80% also unchanged frm yesterday. 30 yr MBS price at 9:30 +11 bp after falling 30 bps yesterday.
So far today markets are very still with little movement in equity markets and not much change in the bond and mortgage markets. This week has been absent of key economic releases, mostly reacting to the never-ending rise in US stock indexes. Tomorrow there will be a couple of data points that should get attention; March retail sales and the U. of Michigan consumer sentiment index. March PPI and Feb business inventories also out but there is no inflation so it isn’t likely to move markets and business inventories normally don’t get attention except for deep-thinking economists. March retail sales are expected about unchanged from Feb sales that were up 1.1%.
Yesterday’s FOMC minutes indicated an increasing dialogue within the group about how and when to begin ending the $85B a month of buying of treasuries and MBSs. Some discussion ensued about the future effectiveness of Fed money printing; so far not much improvement in employment after three years of Fed purchases that have ballooned its balance sheet to about $4 trillion by the end of this year. The meeting occurred before the March employment report that showed non-farm job growth at an anemic 88K. It isn’t likely the Fed will stop the low interest rate bias anytime soon unless there is a marked improvement in job growth. Keeping businesses frm increasing hiring; the ObamaCare bill and spending cuts frm the sequester. Although the spending cuts are just $85B this year in a $3.0+ trillion budget, most of the cuts are where they hurt the most.
The most recent survey of banks and securities firms holds that most are now expecting the 10 yr note at 2.25% at the end of the year, down from 2.32% that was thought in February. Yesterday Bill Gross at PIMCO out saying the largest bond fund in the world is upping its purchases of US treasuries and lessening by the same amount purchases of MBSs. Technically the bond and mortgage markets are holding positive outlooks, but the near term may see some consolidation or slight increases in rates. The last five sessions have seen the 10 yr note yield increase 10 basis points, mostly on overbought momentum oscillators and continued advances in US stock indexes.
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