Friday’s bond market has opened in negative territory following conflicting economic news. The stock markets are also showing losses with the Dow down 126 points and the Nasdaq down 82 points. The bond market is currently down 11/32 (1.88%), but the increase we see in this morning’s mortgage rates should be limited to just .125 of a discount point if comparing to Thursday’s early pricing.
Today’s only relevant economic data was the almighty monthly Employment report for January at 8:30 AM ET. It gave us several key readings on employment sector strength. Those readings gave us mixed results, hence the relatively muted response to the data initially before slipping into negative territory. The first headline number was the 4.9% unemployment rate that was lower than the 5.0% that was expected. Next up on the bad news chart was average hourly earnings that rose a surprising 0.5% when analysts were expecting to see only 0.3%. Rising wages concern traders because workers have more money to spend and the products/services businesses produce are likely to cost more to offset that increase.
The good news in the data was actually very good news. The report showed that only 151,000 jobs were added to the economy, falling well short of the 188,000 that was forecasted. It was also a sizable decline from December’s revised 262,000 payrolls. In some ways, this is the most important of the three headline numbers. So the fact it gave us really favorable results is preventing a sell-off in bonds that would lead to a spike in mortgage rates. At least during early morning trading.
Next week brings us the release of only a couple of economic reports that may influence mortgage rates. One of them is a key consumer-spending report though. It also has two days of semi-annual Fed testimony before the House Financial Services and Senate Banking Committees. None of the week’s relevant events take place until Wednesday, so we can expect Monday’s trading to be driven by weekend news and possibly momentum from this afternoon. Look for details on next week’s calendar in Sunday evening’s weekly preview.