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Wednesday’s bond market has opened in negative territory with stocks mixed and no major surprises on the economic front. The Dow is currently up 18 points while the Nasdaq has lost 13 points. The bond market is currently down 10/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point over yesterday’s morning pricing.
Today’s only economic data was the ADP Employment report at 8:15 AM ET today. It showed that 175,000 private sector jobs were added to ADP’s client payrolls last month, falling just short of the 178,000 that was predicted. Since this number nearly matched forecasts, its impact on the bond market and this morning’s mortgage rates has been minimal. As previously mentioned, I don’t consider this report to be an accurate reflection of the overall employment sector or reliable to base predictions in this Friday’s government report.
Tomorrow has three pieces of economic data worth watching, all being released at 8:30 AM ET. The first is last week’s unemployment figures from the Labor Department. They are expected to announce that 335,000 new claims for unemployment benefits were filed last week. This would be a decline from the 348,000 of the previous week. Bond traders would prefer to see an increase in initial claims because rising claims indicates a weakening employment sector. Therefore, the larger the number of new claims, the better the news it is for the bond market and mortgage rates. However, it is worth noting that this is only a weekly snapshot of the employment sector, so it usually takes a wide variance from forecasts for the data to influence mortgage pricing.
The second report of the morning will be 4th quarter Employee Productivity and Costs data. This report can cause some movement in the bond market, but should have a minimal impact on mortgage pricing. If the productivity reading varies greatly from analysts’ forecasts of a 2.4% increase, we may see some movement in mortgage rates. Higher levels of worker productivity is good news for the bond market because it allows the economy to expand while keeping inflation subdued. Also worth watching is the labor cost reading that bond traders would prefer to see decline in to limit wage inflation concerns.
The least important report of the week is December’s Goods and Services Trade Balance data early tomorrow morning. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to directly affect mortgage rates. It is expected to show a $36 billion trade deficit, up from November’s $34.3 billion.