The bond markets are up a little bit to start the day but we are really just getting back to where we were yesterday morning after we did get a little sell-off that started late in the morning. The ADP report came out this morning and it was much weaker than expect @ +119k when the consensus was +170k. That does set the stage for Friday’s NFP report where I guess the markets will not be totally surprised with a weaker report.
The consensus is currently at +165k so anything south of 125k will give this market the jet fuel that it wants but +200k will put a hold on the rally at least temporarily. However, the situation is percolating in Europe so any significant development will pretty much dwarf the news from the NFP report. I saw this morning where the unemployment rate in Europe is 10.9% which is a 15-year high. Not a good situation. In the meantime we sit comfortably at 1.92% on the 10yr.
The reason for the sell-off yesterday was the strength of the ISM index which show unexpected growth in the manufacturing sector. Remember Lesson 101 about the bond markets…Good news is bad and bad news is good (yes I know that it’s a little bit evil which is probably why 99% of the world hates us). This also caused a push up in stocks which got the Dow to the highest point (13,279) since Dec 2007. Stocks are definitely doing well so far this year. I am far from a “stock guy” but it is obvious that once the world economy is humming on all cylinders then the Dow could very easily go well above 15k. The fact that we are at 13k with still a lot of landmines out there is impressive. Of course we will be battling inflation once that happens but that is a whole different story for another day.
Yes it is Wednesday which means it is MBA Weekly Application Survey day. While the survey was pretty much unchanged there are some interesting nuggets in the report:
- Application increased a insignificant .1%
- The Refinance Index decreased .7%
- The Purchase Index increased 3.7%
- The refinance share decreased to 72.6%
- The FHA share of purchases was 37.0%
- The investor share was 5.7%
- The 30yr conventional rate was 4.05% w/.44pts
- The 30yr FHA rate was 3.80% w/.50pts. which is the lowest rate in the history of the survey
- The 15yr rate was 3.31% w/.41pts which is the lowest rate in the history of the survey
- The 5/1 ARMs rate was 2.87% w/.35pts