Thursday’s bond market has opened flat following mixed economic news. Stocks are showing noticeable gains with the Dow up 93 points and the Nasdaq up 14 points. The bond market is currently down 1/32 (1.88%), but we will likely still see an increase of approximately .125 of a discount point in this morning’s rates due to weakness late yesterday.
The first of today’s three pieces of data was last week’s unemployment figures at 8:30 AM ET. They showed that 285,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 277,000. Analysts were expecting to see a slight decline in initial claims, not an increase. Therefore, we can consider this data to be good news for bonds and mortgage rates.
Employee Productivity and Costs data for the 4th quarter was also posted at 8:30 AM ET. It revealed a 3.0% decline in worker productivity and a larger than expected increase in labor costs. Bond traders would have preferred to see strong productivity and a softer labor cost reading, so the data is also negative news for bonds.
December’s Factory Orders report data was posted at 10:00 AM ET by the Commerce Department. They announced a 2.9% decrease in new orders for durable and non-durable goods at U.S. factories. A decline of 2.6% was predicted, meaning the larger drop is technically good news but it wasn’t enough of a variance to cause much of a reaction in the bond or mortgage markets.
Tomorrow brings us the big news of the week. 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 rise in earnings. Current forecasts are calling for no change in the unemployment rate of 5.0% and approximately 188,000 new jobs added to the economy. 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.