Rate snapshot: Jobless claims hit 9-week high

by MPA01 May 2014

Two data points at 8:30;
weekly jobless claims were thought to be down 9K but were up 14K to 344K, moving back close to that pivotal 350K. March personal income expected to be up 0.4%, a little better at +0.5%, spending expected to be up 0.6% jumped 0.9%. Prior to the reports the bond and mortgage markets were fractionally lower in price after the strong rally yesterday; by 9:00 the 10 yr at 2.66% +1 bp while 30 yr MBS price -3 bps. Early trade in US stock indexes prior to the open at 9:30 had the indexes abut unchanged from yesterday when the DJIA made a new high by 4 points. Weekly claims were the highest in nine weeks; the Easter and Spring break holiday’s may have caused claims to increase. The four-week average of claims, a less-volatile measure than the weekly figure, increased to 320,000 from 317,000 in the prior week.  March personal spending increased the most month-to-month since August 2009 and Feb was revised from +0.3% to +0.4%.
At 9:30 the DJIA opened -6 after a new high yesterday by 4 points; NASDAQ +2, S&P unch. 10 yr note 2.65% unchanged as were MBS prices.
Two more important economic releases at 10:00; March construction spending expected up 0.6% was up 0.2%, Feb construction spending originally reported +01% was revised to -0.2%. According to the report there was an increase in residential construction taking a little of the sting out of the weakness. The ore important April ISM manufacturing index was expected at 54.3, it was 54.9 from 53.7; the employment component at 54.7 from 52.5 and the new orders component unchanged at 55.1. The national ISM data better but not quite as much improvement that we saw in yesterday’s Chicago regional measurement. NO immediate positive reaction to the two 10:00 reports; the stock indexes actually a little lower after the data and the 10 yr note yield continued to decline.
April employment tomorrow should keep rate and stock markets in check through the day. The expectations are for private jobs to have increased 213K and non-farm jobs +215K, the unemployment rate at 6.6% down from 6.7% in March. Yesterday’s FOMC meeting didn’t change much from the March meeting; the Federal Reserve said it would continue to trim the pace of bond purchases as the economy gains momentum. The central bank cut its monthly asset purchases to $45B from $55B and said further reductions in “measured steps” are likely. The Fed still holds markets together with continued low interest rates (FF rate), unless there is a huge change in the positive but slow economic growth the Fed will continue tapering each meeting now until it is all gone. Any waffling from the Fed would send a very negative vibe to markets, showing any concern by avoiding tapering would be considered extremely bearish by investors and traders so the tapering will continue on pace. Don’t make a lot out of the tapering, it has run its course as a market influence and has little economic impact now and going forward.
Nothing significant in Ukraine/Russia situation. The International Monetary Fund approved a $17B rescue package to prevent a collapse of Ukraine's economy. The IMF got approval from the West and from Russia. Putin said "there are no Russian instructors, or special forces, or troops, or anybody else there (Ukraine),"…. "They made this mess themselves, but they want us to resolve it."
The bellwether 10 is headed to 2.60% based on our technical analysis, 2.60% has halted any improvement in rates since back early Feb after testing it four previous times when rates were falling. With April employment tomorrow we are not expecting much change today, but there is an increasingly bullish bias being built in the rate markets. The estimates for tomorrow’s employment report have set the bar high with the strong forecasts. There is a slight chance that the job growth may not meet the consensus but as always we will not go there with any guess.

RateSnapshot courtesy of TBWSratealert.com



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