July 6th, 2009 9:03 AM by Mel Samick
Thursday's bond market has opened in positive territory following a weak opening on stocks. The stock markets are posting sizable losses with the Dow down 174 points and the Nasdaq 43 points. The bond market is currently up 9/32, which, with yesterday's late strength, should improve this morning's mortgage rates by approximately .375 of a discount point compared to yesterday's morning rates.
This morning's economic data gave us mixed results, beginning when the Labor Department reported that the U.S. unemployment rose 0.1% last month to stand at 9.5%. This was slightly lower than the 9.6% that many analysts and market traders had expected and can be considered negative for bonds because it fell short of forecasts.
However, the other two headline numbers from this report gave us favorable results and are making the biggest impact on bond trading this morning. The report showed that 467,000 jobs were lost during the month, exceeding forecasts of approximately 365,000. In addition, the reading that gives average hourly earnings showed no change from May's level. This means that earnings did not rise when they were expected to move higher 0.1%. While the earnings data may not be good for workers, it shows that wage inflation is little threat at this time.May's Factory Orders data was released late this morning by the Commerce Department. It showed that combined orders for durable and non-durable goods rose 1.2% last month. This was also stronger than analysts' forecasts and hints that manufacturing activity was better than expected. Fortunately, this data is not one of the most important reports we see each month and has not derailed this morning's momentum from the employment figures.Overall, the Employment report was favorable for bonds with the larger than expected decline in jobs taking center stage. The unemployment rate was somewhat of a disappointment, but it was still an increase from May's rate. The average hourly earnings reading is the least important of the three but still gave us favorable results. The Factory Orders report was not favorable to bonds or mortgage rates, but it also has nowhere near the level of importance as the monthly Employment report. Therefore, today's data can be considered good news for bonds and mortgage rates.The financial markets will be closed tomorrow in observance of the Independence Day holiday and will reopen Monday morning. There will not be an early close in the bond market today, but I suspect that trading will be thin during afternoon hours as market participants head home for the holiday weekend. This means we should see a fairly quiet afternoon in bonds and mortgage pricing as long as no unexpected news surprises the markets. Mel