Market commentary

Private-sector employment increased by 201,000 from February to March, according to the latest ADP National Employment Report released today, and February’s job growth was revised down to 208,000 from 217,000. The Mortgage Bankers Assn. told us mortgage applications fell 7.5% for the week ending March 25. Applications for purchases fell 1.7% while applications for refinance fell 10.1%. In addition to the above data, which the market has already absorbed, the U.S. Treasury will auction $29 billion of 7 year notes, which follows Wednesday’s mediocre 5 year note auction. The market reactions to this are a slight improvement in bond prices and a decent rally in the U.S. stock markets.

Market commentary

Despite weak economic data last week and higher oil prices, stocks rallied while Treasuries sold off. The Dow Jones traded at 12,236 Friday afternoon after closing the previous week at 11,858, while the 10-year Treasury sold off 17 basis points, trading from 3.27% to close 3.44% Friday afternoon. This morning we see the markets moving in the same directions as last week; stocks are improving and bonds are worsening. Investors in stocks seem quite bullish regardless of the headlines. The nuclear crisis in Japan appears to be worsening, oil prices remain elevated as the military action in Libya continues, and the sovereign debt problems in Europe are not going away anytime soon. Economic data is in abundance this week with the all important jobs report on Friday. In addition to the data, the U.S. Treasury will be auctioning over $100 billion of new debt this week in the form of 2 year, 5 year and 7 year notes. Mortgage prices are .1255 to .25% worse than the close on Friday.

Market commentary

The final revision to 4th quarter 2010 GDP told us the U.S. economy grew at a 3.1% annual pace. That is the good news; however, the lingering question for the 1st quarter of 2011 is if the increase is sustainable given the rise in gas prices and faltering consumer sentiment.

The news from Japan is not as optimistic as the nuclear reactor saga continues, and headlines from Europe, specifically Portugal, are equally dismal as it appears at this point the country is headed for a bailout.

Oil prices are maintaining levels north of $100/bbl as military activity in Libya continues with no real end goal in sight. Quagmire is the descriptor used in one article I read this morning.

Again to day we see the bond market weaker and stocks moving higher. The yield on the 10 year note has pushed back to 3.46% and mortgage pricing is worse by approximately .125%.

Market commentary

Orders for durable goods (products designed to last more than 3 years) in February fell 0.9% as transportation and defense orders were weaker than expected. Expectations were for durable goods orders to rise 1.2% for the month. Ex-transportation, durable goods

And the sovereign debt problems in Europe will not go away as Portugal has now moved one step closer to needing a bailout when the Portuguese parliament rejected the Prime Minister’s proposed austerity measures, aka, tax hikes and spending cuts.

Dallas Fed Bank President Richard Fisher reiterated his feeling yesterday that QE2 will end in June and no more stimulus would be enacted. Bloomberg quotes Fisher as saying that since QE2 was implemented, he has seen "extraordinary speculative activity" and "there is an enormous amount of liquidity sloshing around." Recall that two weeks ago Bill Gross of PIMCO reported PIMCO had sold most of its U.S. government bonds, and after the earthquake, Japan will be using its resources for rebuilding. The question remains, when the Fed, PIMCO and Japan stop buying U.S. debt who will, and at what interest rate?

The markets’ reaction to this news and data leaves me in a quandary. U.S. stock markets are moving higher while bond prices move lower---meaning higher interest rates. Given the poor economic data, sovereign debt uncertainty and the continued unrest in the Middle East one would expect just the opposite.

Mortgage prices as worse by approximately .125% from Wednesday’s close.

Market commentary

It’s ugly out there. This perfectly describes economic data and news headlines this morning. The Commerce Department reported new home sales in the U.S. fell 16.95 in February, the lowest pace of sales since 1963 when the collection of this data began.

Other headlines cover stories such as: the Libyan crisis is escalating; rising tensions in other Middle Eastern countries; claims that the Portuguese government may fail soon; and reports of Japan’s nuclear problem growing.

One would think all of this bad news would have stocks retreating and a resulting flight to safety bid in the U.S. Treasury market. Neither of these scenarios is playing out as U.S. stock markets are relatively flat as are bonds.

Market commentary

Another light day in terms of economic data and U.S. stock and bond markets are taking a breather after Monday’s volatility. With the lack of data the markets are focused on global events and news headlines, and these items are providing no surprises, yet.

Mortgage bonds are trading .125% to .25% worse in price from Monday’s close.

Market commentary

This week’s economic calendar is light with the stock and bond markets again focusing on headlines from Japan and the U.N. military action in Libya.

Perceived progress in resolving Japan’s nuclear crisis has lifted U.S. stock markets this morning with the DOW higher by nearly 200 points. This is spite of more bad news from the housing sector as the National Assn. of Realtors reported existing home sales fell 9.6% with the median price falling to a 9 year low.

In addition to the housing news the U.S. Treasury announced it will be selling its $136 billion of mortgage backed securities over the span of the next year. This news coupled with the rally in stocks has treasury and mortgage bond prices lower on the day, with mortgage prices approximately .50% worse from the close on Friday. The yield on the 10 year note has drifted back to 3.35%.