Oh what a tangled web we weave. Talking about the ongoing wave of debt concerns in the Euro Zone. Lithuania joined the debt woes of Spain, Greece, and Portugal, forcing the ECB to have Plan B ready. That being a stimulus package if all of the above cannot raise capital and pay their bills.
The concerns hit equity markets across the pond like a brick, spilling over to stateside trading right from our opening bell. Currently, stocks are off 200 on the big board as the macro concerns keep on comin’. Bond and mortgage back traders have a tactical bias to sell strength into tomorrow’s payroll numbers but seem to be caught between a rock and a hard place as the above mentioned has caused a flight to quality in U.S. fixed income products.
Currently, the 10 year note is up 18/32’s (yield 3.63%) with mortgage backs up a smooth 8/32’s. Mortgage pricing is better by .25% and the always volatile Employment Report for January is out tomorrow at 7:30 am cst. More on our “employment guess” this afternoon.
Earlier today, Weekly Jobless claims rose 8K, much more than the expected drop of 10K. With seasonal factors in the rear view mirror, the numbers seem to be leveling off at the high end of the range. Disappointing indeed. Preliminary Q4 Productivity jumped 6.2%, in line with most economists expectations. The number is all about growth in output versus hours works. Good for corporate profitability, bad for jobs. We’ll complete the economic hat trick with Factory Orders crossing the tape plus 1%. Most of the gain can be attributed to inventory rebuilding yet a positive sign came by way of Durable Goods, up for the first time in three months. Technically, yesterday’s selling in 10 year notes took the contract to support but held within the current range. That weakness did not accelerate any sell signals but does tell us that sellers are gaining the advantage. As I mentioned above, they are frustrated with macro events just the same.
Looking a little deeper, we see slow stochastics bullish but stalling and Elliot Wave counts pointing to a top and correction since printing a yield of 3.59%. From a pure chart play, we would advise locking in your Austin mortgage rate. Trouble with that advice is stocks and all the global heartburn can put the chart on its head. Tough one to handicap. Given the high profile jobs number tomorrow, it’s best to be a live dog than a dead lion when it comes to your Austin mortgage rate!