ADP’s private job report was a surprise, expected to be up 213K, jobs increased 281K. The positive news keeps coming. Manufacturers, builders and other goods-producing industries increased headcount by 51,000. Employment in construction rose by 36,000, while factories added 12,000 jobs, today’s report showed. Payrolls at service providers climbed by 230,000. Companies employing 500 or more workers added 49,000 jobs. Medium-sized businesses, with 50 to 499 employees, took on 115,000 workers and small companies increased payrolls by 117,000, the most since February 2012. A few months ago ADP changed the way the data is gathered, leading some to put less emphasis on it. Cars and light trucks sold at a 16.9 million pace in June, the strongest since July 2006, after a 16.7 million rate in May, based on data from Ward’s Automotive Group. General Motors Co. and Ford, the two largest U.S. automakers, exceeded analysts’ estimates for deliveries last month.
The initial reaction is about what would be expected, the stock indexes improved and interest rates increased. At 9:00 the 10 yield at 2.60%, stock indexes better but not much after the strong rally yesterday. ADP data a nice gain in jobs but the BLS report trumps ADP, tomorrow at 8:30 BLS is going to report NFP job increase of 213K and private jobs +212K with the unemployment rate unchanged at 6.3%.
At 9:30 the DJIA opened abut unchanged +4, NASDAQ +2, S&P unch; the 10 yr note yield 2.60%. 30 yr MBS price -13 bps from yesterday’s close and -16 bps from 9:30 yesterday.
ADP data has the spotlight so far this morning but at 11:00 it all shifts to Janet Yellen. She is scheduled to speak in Washington at the IMF central banking conference on monetary policy. Until we get her speech markets won’t move much; even after we know what she is saying, unless she plans to announce something markets don’t already consider, traders will return to marking time ahead of the BLS report tomorrow. Yellen said last month that accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth. She emphasized the need to put more Americans back to work and downplayed concerns about asset-price bubbles and incipient inflation.
May factory orders reported at 10:00; expected to be -0.3%, orders declined 0.5% and ex transportation -0.1%. No reaction to it; everything now is Yellen then BLS tomorrow.
Earlier this morning the weekly MBA mortgage applications were down again; given the increasing numbers of purchases it is strange that mortgage applications have declined the last three weeks. Mortgage loan application volume, decreased 0.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index increased 0.1% from the previous week. The seasonally adjusted Purchase Index decreased 1% from one week earlier. The unadjusted Purchase Index decreased 1% compared with the previous week and was 16% lower than the same week one year ago. The refinance share of mortgage activity increased to 53% of total applications from 52% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 8% of total applications.
Twisting, twisting the night away. The rate markets are whipping around in a narrow range moving from slightly positive readings to slightly negative readings. This morning’s price action has pushed the 10 over its 20 and 40 day averages and turned the relative strength index and other momentum oscillators from a minor plus to a minor negative. The best way to describe the market these days, is there is no momentum in either direction. That may change tomorrow when we see the employment report. No change in the longer term outlook, interest rates are going to move higher as the economy improves, inflation gains a few points, and the Fed moves closer to increasing interest rates.