Mortgage Bonds are drifting lower this morning as the seesaw trading pattern for Stocks and Bonds continues.
Yesterday, Mortgage Bonds traded near unchanged for most of the session, until late in the day when a headline from an ECB official read, "Can't assume successful end to Greek bailout review." The news sent Stocks lower, while pushing Mortgage Bonds to session highs. This morning Greece said that it would not be "blackmailed" by its Euro partners, but it did want to find a joint solution to its debt and austerity crisis.
Stocks are shrugging off the debt woes from Europe and are pushing higher in early trading, as Oil rebounds from yesterday's decline and due to Weekly Initial Jobless Claims coming in at 278K versus the 290K that was expected.
Planned layoffs in January surged 63% from December, report outplacement firm Challenger, Gray & Christmas with 40% of the layoffs centered in the oil industry due to recent decline in oil prices.
Productivity in the final quarter of 2014 fell 1.8% vs the slight increase of 0.2% that was expected. Productivity measures the output of goods and services per hours worked. Unit Labor Costs increased 2.7% in Q4 2014, reflecting a 0.9% increase in hourly compensation.
Tomorrow brings us the release of some major data that is high likely to be a market mover. The Labor Department will release the almighty Employment report for January at 8:30 AM ET tomorrow. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller increase in payrolls than expected and little or no increase in earnings. Current forecasts are calling for no change in the unemployment rate of 5.6% and approximately 235,000 new jobs added to the economy.
Some indications show that hiring may have slowed in January due to the drop in oil prices, lighter than expected ADP data along with the decrease in the employment component in the ISM Service Index. However, with Mortgage Bond prices at multi-year highs and tough overhead resistance, even a worse than expected report may not have the "oomph" to see any significant price gains.