Tuesday’s bond market has opened in negative territory again despite somewhat favorable economic data. The stock markets are in positive ground with the Dow up 54 points and the Nasdaq up less than a point. The bond market is currently down 7/32 (2.20%), but due to strength late yesterday we should see only a slight increase in this morning’s mortgage rates.
The Commerce Department reported late this morning that September’s Factory Orders data fell 1.0%, nearly matching forecasts of a 0.9% decline. This is a sign of manufacturing sector weakness, but since the drop did not come as a surprise it has had little impact on today’s bond trading and mortgage pricing.
Tomorrow’s only worthwhile data is the ADP Employment report at 8:15 AM ET. This report has the potential to cause some movement in the markets if it shows much stronger or weaker numbers than expected. This report tracks changes in private-sector jobs of ADP’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that follows a couple days later. Still, because we have seen reaction to the report, we should be watching it. Analysts are expecting it to show that 180,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.
There are a couple of minor pieces of data scheduled for release Thursday morning, but the markets will be preparing for the almighty monthly Employment report early Friday. This is a key report and can heavily influence the markets. It also has the potential to affect the Fed’s decision on short-term interest rate moves. Therefore, don’t be surprised to see some movement in bonds ahead of this report as traders look to protect themselves.