Just when we though the other shoe would drop……….., stocks slid and bonds rally. A few things are in play. First up, Index buying in the Dollar has taken that chart above the 8 and 21 day moving averages, putting pressure on oil and commodities. Strong dollar is good for bonds and fixed interest rate instruments. Next up is that the Fed is in the market, buying 3 year notes to the tune of 1.25 billion, somewhat front running tomorrow’s 37 billion that comes to auction. Last but not least is a little more insight into last Friday’s payroll data. Although the number (-250K jobs) was better than market expectations, Temporary hires lost 10K, hitting a plateau at the very least. The unemployment rate drop to 9.4% looks more like someone at the BLS fat fingered the keyboard instead of reality, given the average job losses of 420k by most measures. Remember the bank stress test. That projected a baseline projection of 8.6% unemployed in Q3 while the most severe case was to be 9.3% (currently 9.4%). Looks to me like more stress on the banks due to delinquencies and foreclosures. Looking at the last four months, the average loss has been approximately 100K. That pins the tail on the donkey at 10.2% by year end. Not trying to be a doubting Thomas, just a realist. The week ahead will step to the plate tomorrow with the beginning of a two day FOMC meeting, NFIB Index, Productivity and Costs, and Wholesale Trade. Wednesday will conclude the FOMC meeting, revealing any change in policy and/or Fed Funds rate at 1:15 pm cst. Thursday we’ll get to see how Retail Sales have been doing along with the Weekly unemployment filings. Friday’s headliner is CPI, inflation at the consumer level. Given that the rally today (mortgage pricing) has not eliminated the bearish trend signals and that the market will need to absorb 75 billion in new auction paper, it’s best to keep an eye on the market in case it tries to bite you.
Given that the rally today (mortgage pricing) has not eliminated the bearish trend signals and that the market will need to absorb 75 billion in new auction paper, it’s best to keep an eye on the market in case it tries to bite you
August 10, 2009|Austin Mortgage Market|
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