Happy Jobless Claims Thursday. I recorded a video on my phone yesterday and it still hasn't finished uploading so until I get a good video camera where I can do video the right way, I'll stick to writing these posts - video will come, though, whether you like it or not. Haha.
Here's a summary of what I recorded yesterday. The FNMA benchmark bond closed down 16 basis points on Tuesday and another 7 basis points yesterday. We got our first bit of Jobs data with ADP Private payrolls and it came in at 177K vs. expectations of 175K. The previous month's numbers were revised upward from 179K to 194K. This is a decent number but I think bond traders are waiting to see how that translates into non-farm payrolls on Friday. Other data of note was the Chicago PMI which came in at 51.5 vs. expectations of 54. On the one hand, that's a pretty big miss but on the other hand, it is still above 50 which is expansionary. Finally, July Pending Home Sales blew away expectations with an increase of 1.6% vs. expectations of .6%. As of yesterday, we were still in that tight trading range that we've been in since July 29th albeit toward the lower end of the range.
This morning is a bit of a mixed bag with 2nd quarter Unit Labor Costs rising 4.3% (inflationary) vs. expectations of 2.1%. Non-farm productivity was down .6% as expected - there's a bit of a correlation here. The higher the productivity, the more in check the costs of labor. Here's the biggie for this morning: August ISM Manufacturing Index came in at...49.4 vs. expectations of 52. If you've studied economics or if you've read my blog very much, you know that a reading below 50 is contractionary which can hint at a recession and / or be one element that could indicate trouble. Jobless Claims came in at 263K vs. estimates of 265K so no big news there. Tomorrow we will get Non-farm Payrolls which are expected to have a much smaller number than last month, the Unemployment Rate, Factory Orders and Average Hourly Earnings. The big data point for next week is the ISM Non-manufacturing Index on Tuesday but there are some other data points as well.
The RSI (Relative Strength Index) is just above the midpoint between overbought and oversold. This is a non-issue at this point. The FNMA benchmark bond is 16 basis points off its low for the day and sits at 103.66 - up four points since the open. The focus for traders is still on the FOMC meeting and the Fed Interest Rate Decision announcement on September 21st. If we see any significant decline in the ISM Non-manufacturing number along with weakness in the jobs numbers on Friday, that might give the Fed pause to raise rates this month and traders might decide to do a bit of buying which would push rates a bit lower. I'm going to change my stance and recommend floating. That said, keep a close eye on the market (you can do that with my buyerZapp - link in the upper right corner of the blog) so that if we get data that is bad for rates you can lock quickly and hopefully beat a potential reprice for the worse.
Make it a great day. College football starts tonight with my alma mater, the University of Utah, taking on SUU in what should be a warm-up game. Game time can't get here fast enough.