September unemployment down to 5.9% from 6.1% in August; the best in six years. Non-farm jobs expected +215K at +248K; July and August revisions added an additional 69K from original reports. Private jobs were expected 215K, as reported +236K. The U-6 unemployment rate at 11.8% from 12.0% in August; U-6 is the number of workers that want full time jobs but are working part time jobs, or can’t find a good full time job. The Sept jobs increase is the best since June; over the past three months, the economy added an average of 224,000 jobs, roughly in line with the average of 228,000 in the first six months of the year. Average hourly earnings for private-sector workers fell a penny to $24.53. Earnings were up 2% compared with a year earlier, still not much growth. The unemployment rate the best in six years.
The trade deficit in the U.S. unexpectedly shrank in August to the lowest level in seven months as exports edged up to a record. The gap decreased 0.5% to $40.1B, the smallest since January, from a revised $40.3B in July, the Commerce Department reported. Not a market mover but nice to see the deficit decline even a little, the US needs increased exports but with the dollar increasing against other major currencies exports will be more difficult to expect.
Interesting this morning; prior to the employment data at 8:30 the key stock indexes were substantially better than yesterday’s close, Europe’s market were also better. Usually markets go into the employment report about unchanged from the previous day. At 9:30 the DJIA opened +90 after trading +99 prior to employment at 8:30, NASDAQ +26, S&P +9. 10 yr 2.46% +2 bp and 30- yr MBS price. It only took a few minutes before the key indexes moved higher. Volatility already this morning; within 20 minutes from the open the DJIA climbed 170 points.
In Hong Kong it isn’t the government that is turning on the protestors, it's normal citizens that are fed up with the streets being blocked and stores unable to open. Hong Kong’s pro-democracy demonstrators came under assault at two protest sites in the city as hundreds of men tussled with students, shouted abuse and removed barricades. Protest leaders said they will cancel planned talks with the government unless the police halt what they called “organized attacks.” The protests have been triggered by China’s decision that candidates for chief executive in the 2017 elections be vetted by a committee, which pro-democracy groups say will guarantee their loyalty to China. No market impact on the events this morning.
Ben Bernanke said today he didn’t qualify to re-finance his home; joke or serious? He pointed to the excesses of Dodd/Frank. For reasons not known CNBC continues to bring Barney on for his incompetent comments. Dodd/Frank has done more to keep the economy down than any other legislation in the last 50 years.
Another key data point just out; Sept ISM services sector index, expected at 58.6 from 59.6; as reported the index was right on at 58.6. New orders better, employment better.
Volatility this morning is high; prices swinging in big moves; employment much better on the headlines but let’s not forget about Europe likely headed to recession with the ECB dragging feet with not much stimulus but a lot of positive talk from Draghi not walking the walk. The 10 under pressure, MBSs under pressure as we would expect with employment. The 10 not being hit too badly at 2.47%, +3 bps. The near term support is 2.50% for the 10.
PRICES @ 10:15 AM
10 yr note:-12/32 (37 bp) 2.47% +3 bp
5 yr note: -11/32 (34 bp) 1.75% +5 bp
2 Yr note: -2/32 (6 bp) 0.56% +2 bp
30 yr bond: -12/32 (37 bp) 3.16% +2 bp
Libor Rates: 1 mo 0.152%; 3 mo 0.231%; 6 mo 0.323%; 1 yr 0.568%
30 yr FNMA 3.5 Oct: @9:30 102.52 -20 bp (-26 bp frm 9:30 yesterday)
15 yr FNMA 3.0 Oct: @9:30 103.22 -15 bp (-22 bp frm 9:30 yesterday)
30 yr GNMA 3.5 Oct: @9:30 103.65 -19 bp (-26 bp frm 9:30 yesterday)
Dollar/Yen: 109.66 +1.23 yen
Dollar/Euro: $1.2519 -$0.0150 (dollar very strong this morning on better employment)
Gold: $1199.00 -$116.10 (lowest price this yr on strong dollar)
Crude Oil: $90.90 -$0.11
DJIA: 16,959.80 +158.75
NASDAQ: 4479.86 +49.66
S&P 500: 1965.54 +19.37