August 31st, 2011 7:21 AM by Lehel S.
At 8:15 the August ADP private jobs report showed an increase of 91K; markets were generally expecting an increase of 100K, in the world of jobs it is considered right on estimates given the revisions that will come later. The stock market trade remained with gains while the treasury and mortgage markets also held slight price gains after yesterday's strong rate market rally. Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in February, when it understated the gain in jobs by 5,000. The estimate was least accurate in June, when it overestimated the increase in employment by 100,000.
The weekly MBA applications out at 7:00; the overall index declined 9.6%. Refinancing applications fell 12.2% in the August 26 week according to MBA. The purchase index ended three weeks of heavy decline though with only a mild 0.9% gain. Rates are near 10-month lows, at 4.32% for 30-year lows for a seven basis point decline in the week. Points for 30-year loans increased to 1.30 from 0.88 (including origination fee) for 80% loans.
At 9:30 the DJIA opened up 53 points, the 10 yr note dipped back from its best levels (+9/32) to +4/32 at 2.17%. Mortgage prices at 9:15 were +8/32 (.25 bp) at 9:30 +3/32 (.09 bp).
At 9:45 the August Chicago purchasing mgrs index, expected at 54 frm 58.8, it was better at 56.5. The components; new orders index fell to 56.9 frm 59.4 in July, prices pd index fell to 68.6 frm 71.7 and employment increased a little to 52.1 frm 51.5. On the initial reaction toe 10 yr fell to -1/32 on the day with its rate at 2.18%, earlier this morning the rate was at 2.14%; mortgage prices held their prices at 9:30 (+.09 bp).
At 10:00 July factory orders; expectations were for an increase of 2.0%, as released orders increased 2.4%; June revised from -0.8% to -0.4%. Ex transportation orders up 0.9%. A better report along with a better Chicago report added to the gains in stock markets and pushed rate market prices lower.
The rate markets are continuing to move in a range, the 10 yr note still looking good but at present levels and uncertainty about what the President will announce in his speech next week the bond and mortgage markets will likely continue to trade in a narrow range. The Fed is also in play; yesterday's FOMC minutes revealed a Fed divided on what to do, if anything. Bernanke says the Fed has many tools in its box to use if necessary. What does that mean? The division at the FOMC on what to do is the most since back in 2002 when Greenspan was in charge. There is no consensus at the Fed and certainly no consensus in the markets. Bernanke wants to jam rates so low that it will force banks to lend and drive investors into stocks, all n an effort to induce consumers to spend more. The problem is, consumers are more wise than the Fed and markets give them credit for; savings rate is at 5.0% after negative savings prior to 2008. As long as job creation remains weak and home prices continue to decline consumers will not increase spending.