What Happened Yesterday?

Too Many Market Orders

Yesterday, the Stock Market had a wild ride.  They’re still determining the reason, however, many attribute it to Market Sell Orders.  Remember, computers are set to sell stocks, when a stock gets to a certain level.  Then, these computers are programmed to sell at the next market level, to “fill” their order requirement.  So, stocks got trapped in a technical nightmare, after losing so much value already, and basically, computers started “selling” at each market level…which kept getting lower…and lower.  The volatility was impressive, to say the least.  For example:   Accenture (NYSE: ACN) went from $40 down to 14 Cents!  If that wasn’t impressive enough, the stock ended the day at $41.09. So, you can imagine the roller-coaster ride that interest took, as well.

Fat Finger Thursday

Another analogy is that there was a Fat Finger involved in yesterday’s debacle.  Again, using computers, a trader could have accidentally touched one too many zero’s, when trying to sell a certain number of Stock, causing panic in the markets.  Regardless, it’s interesting stuff.

Unemployment Figures

Unemployment moved from 9.7%, in March, to 9.9%, in April.  However, the Labor Department reported that 290,000 new jobs were created.  The market expected 187,000 new jobs, so that’s a serious increase.  Coupled with the fact that revisions to February and March’s numbers increased jobs numbers by 121,000.

More Jobs, But Less Employment?

So, how do we move to a higher unemployment rate of 9.9%, yet add 290,000 jobs?  Well, when people are laid off, they probably prefer to collect their unemployment checks for a while.  If you don’t look for a job, for four weeks, than you’re removed from the Unemployment Figures, by the Labor Department.  It’s just the way things are…So, last month, 805,000 people started looking for jobs, again.  So how those numbers can twist and turn, like the roller coaster, above?

It's Safe To Float...

Locking Advice

I’m in favor of locking in, while the gettin’s good!  Germany has decided to help bail Greece out.  So, that could have a negative effect on the flight to quality, or safe-haven of Mortgage Backed Securities.

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Volatility Is Back With A Vengeance!

The Best Jobs Numbers In Three Years!

That’s what we may see tomorrow.  So, you’d better lock in your interest rate ahead of this news.  Forget the fact that we still will have over 5,840,000 people claiming Emergency Unemployment Compensation (EUC), that’s not even factored into the 4,660,000 plus people who are figured into the continuing Unemployment Claims.  Rates will increase, news stations will celebrate, politicians will be patting their own backs, and for what?  Simply a manner by which we report these statistics, as opposed to the real numbers.

This Is It!

One day at a time…that’s what we’ll have to be prepared for, as the $1.25 Trillion Government Purchase Program for Mortgage-Backed Securities HAS ENDED! In order to attract sideline investors, other than the U.S. Government, yields, and therefore interest rates, will have to be higher.  PERIOD!

Highest Yields Since January 2009

Locking Advice

Refer to paragraph one!

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We Managed To Break Above All Lines Of Resistance

Unemployment Drops to 9.7%

YooHoo!  That’s the Headline on the News Channels and Websites.  So, why haven’t rates skyrocketed?  Check this out…The Headline Number for Jobs Creations, for the month of January, was a -20,000 figure.  Yes, that’s a negative twenty thousand.  We were expecting 15,000 jobs gained.  This number was reported to us by the Business Survey.  Quite frankly, it’s generally a very unreliable Survey.  So unreliable that it has three names.  Business Survey, Current Employment Statistics Survey (CES), and The Establishment Survey.

So, Why Is The CES Used?

The CES can be more accurate, when there is less volatility in the market and numerous jobs numbers are either being lost, or gained.  So, it can be a helpful tool.  By interviewing approximately 140,000 business, nationwide, the survey gets its information from these businesses.  It also takes into account the birth/death ratio, when calculating their jobs numbers, and this can be very innacurrate in volatile times, as well.

Revisions To The CES

Here’s how accurate the CES has been (sarcasm).    December’s numbers were revised to 150,000 jobs lost.  Almost double what was originally reported.  November showed 60,000 additional gains, and October showed an additional 100,000 jobs lost.  Then, the big Benchmark Revision I discussed on Wednesday.  As I stated, the revised numbers were an additional 900,000 jobs lost from March of 2008, to March of 2009.

The Household Survey

This month, the media chose The Household Survey, in which to report the labor statistics.  This Survey, formally known as Current Population Survey (CPS), calls about 60,000 actual households.  The household survey showed that the U.S. gained 540,000 new jobs, in January.  The Unemployment Rate is reported by The Household Survey and jobs numbers are reported by both the Business Survey and The Household Survey.  So, the media can take information from either of these Surveys.

The Fed Is Watching

“I always feel that, (The Fed) is WATCHING ME.”  Falco (I think), but more recently made popular by Geico commercials.  If the Fed feels as though the media is portraying a move toward more healthy labor statistics, they may remove their “extended period,” comments from their next FOMC meeting.  That wouldn’t be good for interest rates.

Quick Sidenote

$1.173 Trillion, of the Fed’s designated $1.25 Trillion, has been spent on the Mortgage-Backed Security Government Purchase Program.  We’re gettin’ close folks!  Rates will increase when this occurs!

Locking Advice

Rates are similar to yesterday, but I feel that the market it just digesting the labor statistics.  I’d lock, today.  But, we have managed to stay well above the 50 and 100-Day Moving Average, so floating would be risky, but could be beneficial.  With rates at, or below, the 5.0% area, how can you go wrong?  I also feel as though investors will take this new lower unemployment figure and take their funds from bonds and put them into stocks, as stocks generally do well with better than expected unemployment statistics…

Related Must Reads

The Benchmark Revision Numbers
Fed’s “Extended Period” Comments…What It Means
Why Rates Will Increase Once The $1.25 Trillion Is Spent

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Jobs Numbers Will Move Markets

Jobs, Jobs, Jobs

American Data Processing (ADP) has reported their version of the employment sector.  They reported only 22,000 jobs lost, for the month of December, 2009.  The market was expecting a 30,000 lost job number.  So, better than expected news can weigh on interest rates, and they have, slightly.  We’re currently down 12 basis points, which is about a cost of .125% from yesterday’s pricing.  The official jobs numbers are scheduled for release on Friday.  Together, with the public sector and private sector, we’re expected to gain approximately 13,000 jobs for the month of December, with the Unemployment Rate holding steady at 10%.

The “Benchmark Revision”

Friday will give us a very important figure.  The Benchmark Revision to the Jobs Report will give us a revision to the revised numbers that we’ve already seen, from March to March.  So, when we see jobs numbers, they, generally get revised, from one month, to the next month, for two months in a row.  So, the reason for the revisions, is to get more accurate figures so we can see a more true economic picture.  What’s the problem?  Well, even though we expect these revisions to be a more accurate taste of what’s occurring, it’s old news.  And, old news is not really news.  So, even though the revised numbers could paint an ugly picture of what truly happened from March of 2008 through March of 2009, the current numbers (with a gain of 13,000 new jobs) could be absorbed as good news for our economy, and therefore, bad news for interest rates.

Looking Into The Crystal Ball

So, the Administration expects a 6.0% Unemployment Rate in five years.  Well, read this past article about these numbers and see for yourself where you think interest rates may be in five years.  If we cannot realistically reach these numbers, then we could have further deficit problems, which would lead to higher interest rates.

Locking Advice

We’re still under the 50-Day and 100-Day Moving Averages.  It would be very difficult to maneuver above these two lines of resistance, so locking it, might be prudent, before the Jobs Numbers turn rates ugly, before you have a chance to lock in, Friday Morning.

Related Must Reads

The Real Jobs Numbers
ADP is O-F-F  A Look At Their Sometimes Interesting Numbers
What Is A Moving Average?

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Unemployment Down To 10.0%

Fewer Lossed Jobs and Lower Unemployment Rate =

Fewer jobs were cut last month than expected.  11,000 jobs were cut and the market expected 125,000 to 130,000.  Now that’s an important number!  Also, a very important Unemployment Rate dropped to 10.0% from last month’s 10.2%.  These numbers, coupled with the fact that the last two months’ numbers were overstated by 159,000 jobs, led interest rates to spike up quite aggressively.  “Temp-Jobs” numbers spiked up 40,000 in number.  This is important because we’ve learned from prior recessions that we see an increase in temporary positions before we see an increase in permanent positions.  Makes sense! 

Higher Rates…Who Cares…More Jobs…More Buyers

Is the worst of the recession behind us?  These numbers appear to support that we may be in a modest recovery.  What’s interesting about this is that even if rates move up, it’s better that we have people returning to the work force, than keeping rates in the 4’s and not having the labor statistics emerge confidently.  People working means people buying homes! 

$1.25 Trillion Well Is Drying

In an effort to try to help keep interest rates low, the Federal Reserve purchased $16 Billion in Mortgage-Backed Securities this past week.  So far, $1.054 Trillion has been spent on the program.  With only $1.25 Trillion for the total program funds…you can see that the reservoir is drying up.  When it does dry up, the effort to keep mortgage interest rates low, will dissipate. 

Locking In…

If you didn’t follow the afternoon advice we gave to lock, you’ve lost a lot of money, or you’ll have a higher interest rate than November 30th’s warning.  However, we are sitting above the 50-Day Moving Average.  If we can stay above that strong layer of support…it may be beneficial to float your rate into next week.  If we do, however, break that barrier, than locking, immediately, would be prudent.  Have an excellent weekend! 

Related Must Reads

Higher Rates…Period!

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Close To All-Time Low's, But HEAVY Resistence Overhead...

Buyer’s WAKE UP!

Last week the borrowing costs on 30-year fixed rate mortgages, excluding fees, averaged, down 0.07% from the previous week and the lowest since mid-May. Mortgage interest rates are hovering within shouting distance of the all-time record low, set during the week ended March 27th — yet according to data provided by the Mortgage Bankers of America — the demand for home purchases dropped to a 12-year low last week!  Follow interest rates on my blog-site at www.accessloans.net .  Half-way down, on the left hand side you’ll see the national average of interest rates.

Jobless Claims

This morning’s Initial Jobless Claims came in at 505,000.  The media will think this is good news because that number has been dropping for weeks, however, let’s look at the bigger picture.  Continuing Claims numbers have dropped; from 6.82 Million to 5.81 Million.  However, why do you think that is?  You think people are being hired?  Or do you think that people have had to have Unemployment Claims for so long, that they are running out of benefits?  I think it’s the latter...as Obama had to sign a 20 week extension to benefits as Unemployment hit 10.2%.

Higher Rates…Period!

The Fed will announce the size of the Treasury Auctions scheduled for next week.  Keep in mind that the Fed’s $1.25 Trillion Mortgage-Backed Security Purchase Program is winding down.  Yet, applications, in the past few months, have been pretty high as rates have hovered around 5.0%.  So the supply of these loans will hit the market at a time when demand, or buying power of the Fed, will be going away.  You know the answer to that equation.  Higher Rates…period!

Stocks Taking A Hit

I’ve been mentioning that the Stock Market has been overbought, for some time now.  Well, it’s taking a hit today.  That’s helping bonds, momentarily, however, we should bounce right off the highs of 2009.  So, again, it’s an excellent time to lock!

Related Must Reads

Read, “Interesting Side Note On Unemployment”
Another Reason For Higher Rates
Stocks Overbought…A Look Into September 1, 2009

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Rates Should Settle AFTER the Holiday

Jobs Numbers Are In

Why’s everyone so dang excited?  216,000 lost jobs reported last month.  However, they expected 230,000 jobs lost.  This whole idea of what’s expected, compared to what’s actually reported kinda cracks me up.

Why I’m Crackin’ Up

So, over the course of this past year, the Labor Department continues to revise previous months’ data.  Particulary regarding Jobs Lost.  Each month has been revised by about 50,000 Jobs.  And it’s NOT in the positive direction.  So, if you add the 50,000 expected when we revise these numbers, next month, we would have lost 266,000.  More than the 230,000 expected.  But the markets will have already moved, positioned themselves, and people will have made and, or lost their money in their investments, etc.  So,  not very funny, but I’m still laughin’.  The markets are taking this as good news, when really, I don’t think it’s so good.  BUT, we’ll have to ride the wave.  Today, Stocks will probably fare relatively well, before the Labor Day Holiday. 

The Revisionist

That’s why I have called myself a “revisionist,” in previous articles.  With markets revising themselves every month, I thought it a catchy label.

Highest Unemployment in 26 Years!

Now, this is the information that should be moving rates lower.  The unemployment rate spiraled to 9.7%.  The highest Unemployment in 26 years!  Since our current recession started, in December of 2007, total jobs lost are greater than we’ve seen since just after World War II.  Scary. 

Short Escrow?…Lock

So, as we just sit on the 200-Day Moving Average, I think for short periods, it’s a good time to lock.  But, again, if you’re in a long escrow, I feel like we’re going to see lower rates into October.  Have a Great Labor Day Weekend.  We’ll see ya Tuesday!

Dollar Weakening

Whoa Nelly, Whoa!

It was, frankly, a horrible week for interest rates and inflation was the primary reason!  First of all, Productivity (output per hour worked) rose at a 2.6% annual rate, this past quarter.  This is revised from 2.3% estimate that we saw just one month ago.  Also, unit labor costs rose 2.2%.  This is revised from 2.3% that we saw just one month ago.  Both of these revisions are actually good for inflation, as productivity can increase the amount of sales and services of a business, without increasing the business’ costs.  Also, unit labor costs can increase wage-based inflation, so a lowering of costs is good also.  Not good enough to help with the inflationary concerns that we keep seeing, however.

Jobless Claims Lower Than Expected

The initial Jobless Claims Report showed only 357,000 new claims this week.  Much lower than the 372,000 the market was expecting.  This was kind of the tip of the iceberg regarding the spike in interest rates.  What should have helped rates a little was the announcement from the Bank of England (BOE) and European Central Bank (ECB) to leave their interest rates unchanged.  Unfortunately, however, The ECB President Jean-Claude Trichet mentioned that they may have to raise their rates due to spiking costs in oil to over $134.00 per barrel.  This weekend the US Dollar, and therefore created more negative movement regarding US interest rates.

Oil’s Just Killin’ Us

Even with this week’s 5.5% Unemployment Rate jump from 5.0% just a month ago (the biggest increase since 1986), rates couldn’t get over the oil cost and inflation concerns.  As mentioned in another article, Goldman Sachs says that gas prices in the US will spike to $5.75 per gallon while the price per barrel with soar to $200 in the next two years.  Also, the US economy has lost 324,000 jobs this year.

Good news on housing, though!  Pending Home Sales for April rose 6.3%.  The market expected a loss of 1.0% and there seems to be a lot more activity here in our area too.

Are We In A Labyrinth?

Check out this comment by Good ‘Ole Ben Bernanke from this week, “the latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations.”  He indicated that the Fed is in no hurry to increase the overnight rate due to “slack” in the economy, which can lower inflation.  This is interesting because oil prices are out of control and the dollar has been weekend by this and the lowering of the overnight rate (oil is traded in dollars).  If the Fed doesn’t start considering increasing the overnight rate, the dollar may continue to weaken.  Here’s my take…increase the overnight rate.  This will strengthen the dollar, and oil prices will go back down to $100 a barrel.  Doesn’t that sound lovely!  $100 a barrel!  Just this year that was despicable, now it sounds lovely.  Another cause for interest rate deterioration was the comments by Richard “Loose Lips” Fisher, “We are witnessing a negative feedback loop…which is that a weaker dollar can lead to further inflationary pressures which in turn leads to a weaker dollar, etc., and to dampened economic actitity.”  If the overnight rate doesn’t get increased, we may be stuck in this labyrinth of higher long term rates for some time to come.  Hopefully, next week I’ll have more consumer friendly information…Unitl next week.

Jobs Report Helps Rates

Stubborn Trend Lines FINALLY Broken

Last week we were talking about two things of great importance.  Mortgage Backed Securities difficulty regarding moving above the 200-day moving average, and what the Jobs Report numbers would be. 

Well, first thing on Wednesday morning, Automatic Data Processing came out with their ADP National Employment Report.  The ADP National Employment Report is a monthly estimate of private non-farm employment in the United States based on aggregated and anonymous ADP payroll data.  Now, they haven’t been the most reliable source regarding employment numbers, this past year.  However, the markets still watch them very closely and react to the information that they report.  The government expect 123,000 new jobs for the month of August, however, ADP’s figures came in at 65,000-significantly lower than expectations.  This resulted in the first significant rise above the 200-day moving average…FINALLY!  The next day we lost some ground, however, mortgage bonds sat at $100.22 level.  They 200-day moving average was at the $100.14 level.  Just $ 0.08 above.  Talk about positioning itself causiously in line with the next morning’s report. 

More Job Loses

Sure enough, Friday morning’s Job Report was below expectations.  Far below!  As opposed to 123,000 new jobs, the government reported LOSING 4,000 jobs.  This report was so bad, that now traders are wondering if the Federal Reserve will lower the overnight rate more than the .25% expected, and actually lower .5%.  The market reacted accordingly, and by the end of the day, mortgage backed securities were up 53 basis points.  This means that a loan that might cost you 1.0% point (or one percent of the loan amount) on Thursday, would only cost you 0.5% point (½ of one percent on the loan amount) on Friday evening.  A perfect time to lock!    

The unemployment rate remains steady at 4.6%, however, with the consulting firm Challenger, Gray, & Christmas announcing an 85% jump in corporate layoffs during August, compared to July, keep your eyes and ears tuned to these figures too. 

Lower Rates?

What this action did was to give a significant increase in bond values, lowering their yield, and therefore interest rates!  If we can stay above the 200-day moving average for quite some time, than that will become a layer of support, as opposed to the layer of resistance that it has been in the past. 

September 18^th is our big day.  Will the Fed cut the overnight rate by .25%, or by .5%?  What the Fed says when it releases the expected cut will be of severe importance.  The overnight rate will help lower rates on Home Equity Lines of Credit, personal loans, and auto loans, but it could have an adverse effect on mortgage rates.  If the Fed comments that they feel as though inflation is under control, we should be O.K., however, if they indicate that they’re cutting rates, even though inflation is a concern of theirs, interest rates could worsen. 

Bernanke Speaks

Ben Bernanke is speaking in Germany this week, and believe me, the markets are listening.  Next week we should just have time to report on the Fed’s rate decision.  With rates still hovering around 6%, it’s a wonderful buyers’ market out there…Until next week…

Rates Down, Then Up

Outlook on Banks:  UGLY!

If you pick up the papers or go on-line and read about what is transpiring with Banks lately, you’ll notice that generally, the news is not good.  When the CEO of one of the nation’s largest lender sells stock in his own company…and a lot of it…it might not make since in investing in that company.  Basically, that’s what is happening with the Banks and Savings and Loans right now.  Investors are weary about buying loans nobody wants.  So, interestingly enough, you may see lower interest rates for conforming loan amounts (loan amounts $417,000 and lower for single family residences).  However, higher interest rates for loans greater than $417,000.  It’s actually quite a phenomenon.  The difference is that loans that are of conforming loan limits can still be purchased in the secondary market by FannieMae and FreddieMac (the two largest purchasers or real estate loans in the world).  So, if there is a market to sell these loans, than they are still available to the public as good rates.  However, if there isn’t a market to sell the loan…than the risk goes up, and therefore the rates as well.  Now that’s in a quick nut-shell explanation, but basically that’s what’s up right now. 

Outlook on Jobs:  UGLY!

Last week, we did break above the 50-day moving average.  This has really helped conforming loans.  Keep in mind that as stocks move higher, money is pulled out of bonds and rates go up.  But when stocks are not doing so well, money gets poured into bonds and interest rates benefit from this.  This last Thursday, Initial Jobless Claims were reported at 307,000 which was basically what was expected.  The great news for interest rates came out with the Jobs Report on Friday.  The Labor Department reported that only 92,000 jobs were created in July, and they expected 135,000.  In addition to this, the unemployment rate dropped to 4.6% from 4.5% too.  This takes the heat off of waged-based inflation, and keep in mind that inflation is bonds’ worst enemy!  

Now, this Tuesday the Fed agreed to keep interest rates UNCHANGED.  So, the overnight rate stayed at 5.25%, which should really showed have helped mortgage backed securities (or bonds).  However, the “tone” of the statement indicated that the Federal Reserve is still concerned that inflation, “will fail to moderate as expected.”

Speculation Moving Rates

There goes that speculation again…causing uncertainty in the market and not helping interest rates (on conforming loan limits, remember).  So, watch the stock market, and when it’s moving up…bond values are probably moving down, causing rates to move up.  And…if the stock market continues to decline, as we saw this last week, bond values would move up…causing some lower rates.  We are in un-chartered water here, and it’s fun to watch and see what will happen on a daily basis.  Just be thinking about the unfortunate results of what’s occurring with these banks and lending institutions.  There are a lot of people losing their jobs, investments, etc. and so we’re with them in though as we move from this market, to hopefully soon, another market…how quickly they can change…until next week…