Tuesday’s bond market has opened in negative territory following stronger than expected manufacturing-related news. The stock markets are reacting favorably to the data with the Dow up 174 points and the Nasdaq up 66 points. The bond market is currently down 18/32 (1.80%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
Today’s only data came late this morning when the Institute for Supply Management (ISM) posted their manufacturing index for February. It came in at 49.5, exceeding forecasts of 48.7 and up from January’s 48.2. This means that more surveyed manufacturers felt business improved in the sector than did last month. The sub-50 reading means more felt business conditions worsened than those who felt they had improved though. Still, the higher reading indicates the manufacturing sector was a bit stronger than many had thought, making the data negative for bonds and mortgage rates.
Tomorrow has two items on the agenda. The first comes from payroll processor ADP at 8:15 AM ET. They will announce their change in private-sector payrolls processed last month, giving us an idea of employment sector strength or weakness. Since it is not a government agency report, it isn’t considered to be highly important. However, as with any employment-related data, it does draw some attention. This is especially true for this report because it is posted just a couple days before monthly employment figures are released by the Labor Department. I personally believe it is given more attention than it really deserves, particularly because many use it to predict the monthly government figures but often fail miserably. Still, if it shows a noticeable variance from expectations of 190,000 new private sector payrolls, it will likely cause movement in the markets and mortgage rates.
The Fed Beige Book is the next report scheduled for release, coming at 2:00 PM ET tomorrow afternoon. This report details economic activity throughout the country by Federal Reserve region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading tomorrow. It probably will not cause a major sell off in the stock or bond markets, but it is still worth watching.