A few key economic reports to think about this morning. At 8:30 weekly jobless claims were about right on estimates, -14K to 298K---fractionally better but not much. No states were estimated and there were no special factors, the Labor Department report showed. The monthly average of claims, a less volatile measure than the weekly figures, rose to 300,750 last week from 296,000. The number of people on jobless benefit rolls declined by 49,000 to 2.5 million in the week ended Aug. 9. It’s at the lowest level since June 2007, before the last recession began. Claims reported will be part of the data Labor uses in its August employment report; the cut off for data used to calculate the monthly employment data is generally the 12th of the month. The report is seen as some additional evidence the Fed can increase its thoughts about increasing rates, yet quality remains a major concern for Yellen and everyone else that digs into the guts of employment data.
More bad news out of Europe this morning, adding to the idea central banks must keep supporting economies. Manufacturing and services activity slowed in August, a preliminary report showed today. A purchasing managers’ index for both industries fell to 52.8 this month from 53.8 in July, Markit Economics said. Economists predicted a decline to 53.4, according to the median of 20 estimates in a Bloomberg News survey. In China; the preliminary purchasing managers’ index from HSBC and Markit Economics was at 50.3 in August, missing the 51.5 median estimate of analysts.
Three reports at 10:00; July existing home sales were expected to have declined 0.8% to 5.00 million, sales were up 2.7% overall to 5.15 million, +2.7% increase in single family sales. 29% of sales were cash, still very high. Based on sales there is a 5.5 month supply and about a normal supply, 2.37 million homes for sale; yr/yr sales still down 4.3%. Sales were the best in 10 months. Earlier this week July starts and permits were much better than forecasts, as was the NAHB housing market index. Existing home sales, which are tabulated when a purchase contract closes, are recovering from a 13-year low of 4.11 million in 2008 after reaching a record 7.08 million in 2005.
July leading economic indicators was expected up 0.6%, as reported up 0.9% the best since March.
August Philadelphia Fed business index was expected at 20.0 frm 23.9 in July; as reported the index jumped to 28.0 the highest since March 2011.
Today’s economic reports all better than expected; the reaction isn’t helping the stock market however; with strong data the fear that the Fed is closer to increasing rates (at least in thinking about it). There was no selling in the treasury market, the 10 yr at 10:15 +3/32 to 2.42% -1 bp; 30 yr MBS prices +11 bps slightly better than at 9:30.
Still holding positive technicals but weakening at the moment ahead of the Yellen and Draghi speeches tomorrow. The preponderance of recent economic measurements have been better than forecasts; no inflation though. Geo-political situations that were helping support lower rates have abated for the moment and possibly will simply fade away permanently if Russia and Ukraine leaders can come to agreements. Putin isn’t someone that can be accurately anticipated; for now the fear factor is gone from the thinking.
BEST TO KEEP LOCKED TODAY; NOT LIKELY PRICES WILL IMPROVE AHEAD OF THE FED JACKSON HOLE SYMPOSIUM TOMORROW.
PRICES @ 10:15 AM
10 yr note: +2/32 (6 bp) 2.43% unch
5 yr note: unch 1.63% unch
2 Yr note: unch 0.47% unch
30 yr bond: +8/32 (25 bp) 3.21% -1 bp
Libor Rates: 1 mo 0.155%; 3 mo 0.234%; 6 mo 0.327%; 1 yr 0.556%
30 yr FNMA 3.5 Sept: @9:30 102.42 +8 bp (unch frm 9:30 yesterday) 4.0 coupon 105.59 +6 bp (-1 bp frm 9:30 yesterday)
15 yr FNMA 3.0: @9:30 103.31 -7 bp (-17 bp frm 9:30 yesterday)
30 yr GNMA 3.5 Sept: @9:30 103.62 -1 bp (+2 bp frm 9:30 yesterday) 4.0 coupon 106.31 +3 bp (-2 bp frm 9:30 yesterday)
Dollar/Yen: 103.74 -0.02 yen
Dollar/Euro: $1.3270 +$0.0011
Gold: 1276.60 -$18.60
Crude Oil: $96.07 unch
DJIA: 17,032.05 +52.92
NASDAQ: 4523.17 -3.32
S&P 500: 1990.32 +3.81