Market Analysis

Today's commentary from Larry Baer on his Market Alert site offers additional insight into the market. 

from Larry Baer's Market Alert Commentary:

Commentary:  The much anticipated July nonfarm payroll numbers are in . and they are . essentially a nonevent as far as mortgage investors are concerned.

The Labor Department reported this morning that July nonfarm payrolls shrank by 51,000 jobs while the national jobless rate rose to 5.7% from 5.5% in June.  The department revised the nonfarm payroll headcount for both May and June - saying job loss in May amounted to 42,000 rather than the originally reported 62,000 loss while the number of jobs lost in June was actually 51,000 rather than the initially reported loss of 62,000.  (Hmmm . do the Labor Bureau statisticians just use a 62,000 job loss value as a default setting - until they find the time to get around to making a more accurate head count?  (Just a little editorial license here - I'll get off of this soapbox in just a minute.)

As usual the media is breathlessly reporting that the national jobless rate has now reached its highest level in four-years -- when it was 5.5% in July 2004.    Why not report that the national jobless rate is only 1.5% higher today than in was in 1999 -- when it was at its lowest level since 1969.   To put all of this chatter into a completely different perspective consider the fact that the national jobless rate in July 2003 - a year of record setting mortgage production -- was 5.6%.  I don't know about you - but somehow today's reported bump to a national jobless rate of 5.7% just doesn't seem all that dramatic to me.  And as you can tell by the early price action in the mortgage market - it doesn't mean much to mortgage investors either. (Ok, I'm through editorializing - at least for right now.)

In a separate report the Institute of Supply Management said its index of national factory activity edged down to a reading of 50.0 from 50.2 in June.  Most economists had been anticipating a July reading of 49.3.  Detail in this report showed that inflation pressures subsided a little - but remain at relatively high levels - a condition that will likely impede any sustained move to lower levels for mortgage interest rates.

Today's reports are broadly consistent with other data that shows the economy remains stalled, not growing much - but then again not contracting much either.

Looking ahead to next week the Federal Open Market Committee will meet in a one-day session on Tuesday to set monetary-policy for the next six-weeks.  It is unlikely they will make any change to short-term interest rates - but traders will likely be jittery up and through this meeting anyway - particularly if Monday's June core personal consumption expenditure index (a part of the June Personal Income and Spending report and one of the Fed's favorite measures of inflation at the consumer level) post a reading above 0.2%.   Just to make things really interesting Uncle Sam will be in the credit markets on Wednesday and Thursday looking to borrow record setting sums of money in the form of 10-year notes and 30-year bonds.