Before we get into the Employment Report, let me try to explain what happened yesterday when stocks traveled to the down 1000 point abyss. On the NYSE we have circuit breakers, a system that is on individual stocks to slow down trading for 30 to 90 seconds, letting bid and offer imbalances catch up. This makes for a “true valued” market, not one that is lop sided. With technology today, we have what’s called “high frequency traders”, those that trade in nano seconds, seeking the best price no matter if you’re selling or buying. These computers do not slow down if an exchange activates a circuit breaker, instead trading “through” or “around” the exchange, finding another regional exchange that will handle the order. For a period of about 15 minutes, that’s what happened as sell orders pushed circuit breakers and then traded around the exchange. To give you an example, Proctor and Gamble traded at $56.00 when the NYSE circuit breaker kicked in. Sell orders were still streaming with high frequency traders traveling to another exchange to get orders sold for their customers or portfolios. They got filled “away” at $39.00 yet the stock never traded below $56.00 on the NYSE. One that’s better than that happened with Accenture’s stock. When the same thing happened and the circuit breaker slowed trading on the stock at $40.00, the high flyers when over, under, around and through with trades getting filled as low as 1 cent. Not a good day if you were the seller. Both the Naz and NYSE are in the process of canceling trades that were outside of 60% (from their low end circuit breaker value). Let’s just call this crazy and needs to get fixed.
The Employment Report did not disappoint, posting a plus 290K jobs with the unemployment rate at 9.9%. Services and Manufacturing sectors had gains of 166K and 44K respectfully. Even construction added 14K. Consensus workers (temp positions) rose 66K. Back month revisions (higher) were also posted for February and March. Overall, the economy has gained over 500K new jobs in 2 months. If not for the situation in Greece/Euro-zone, this would have been a “Katie bar the door” game changer for bonds, notes, and mortgage backs. Nonetheless, both stocks and bonds have been quite volatile this morning, trading in a wide swinging range. Currently, stocks are off 125 on the big board (range down 185 to up 20). Mortgage backs have been down as much as 15/32’s to down 4/32’s.
The roller coaster will continue to be in play as Germany’s Parliament just passed the bailout package for Greece. France approved the package yesterday. Markets like this are dangerous as fear makes a strange trading bedfellow. Overall, once Greece becomes a back burner issue (and it will), the focus will be on our economy which is starting to turn the corner. That will inevitably lead to higher Austin mortgage rates. Not that much higher but just the same, not the levels you are seeing now. Borrowers are smart to lock their Austin mortgage rates NOW.