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Thursday’s bond market has opened in negative territory with stocks showing strong gains during early trading. The Dow is currently up 127 points while the Nasdaq has gained 37 points. This has drawn attention away from today’s relatively minor economic data. The bond market is currently down 8/32 (2.69%), which with weakness from late yesterday should push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point.
The first of this morning’s three pieces of economic data was last week’s unemployment figures at 8:30 AM ET. It showed that new claims for unemployment benefits fell to 331,000 last week from a revised total of 351,000 the previous week. The decline of 20,000 initial claims was more than analysts were expecting, hinting at a stronger than thought employment sector. That makes the data negative for the bond and mortgage markets, but because this data tracks only a single week of new claims, it has had a minimal impact on this morning’s trading.
4th quarter Employee Productivity and Costs was the second report of the morning, revealing a 3.2% increase in worker output per hour. The labor cost reading fell 1.6%. The productivity increase was stronger than thought and the labor cost number was weaker than expectations. Since rising productivity allows the economy to expand without strong inflation and the decline in labor costs helps keep prices subdued that fuels inflation, we can consider both readings favorable for the bond market and mortgage rates.
Also posted at 8:30 AM this morning was December’s Goods and Services Trade Balance report. It showed that the U.S. trade deficit stood at $38.7 billion in December, up from November’s revised deficit of $34.6 billion. This was not enough of a variance in a report that is considered of low importance to the mortgage market to affect today’s rates.
Tomorrow brings us the almighty monthly Employment report from the Labor Department that will likely heavily influence the financial and mortgage markets. They will release January’s report 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 rise in earnings. Current forecasts are calling for no change in the unemployment rate of 6.7% and approximately 175,000 new jobs added to the economy with a 0.2% increase in earnings. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the strength of economy and would! likely lead to a sizable improvement in mortgage pricing.