Market Snapshot
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Wednesday, March 31, 2010 |
| The markets were shocked this morning at 8:15! The ADP employment report for March was widely thoiught to be up 40K jobs, ADP reported private jobs actually fell 23K. The 23,000 decline was the smallest in two years and followed a revised 24,000 drop the prior month frm 20K originally reported. ADP has consistently over-stated jobs for the last six months compared to the BLS reports; frm a 2K overstatement in Feb to overstated 151K jobs last November. For the last two weeks markets have been almost giddy that March job growth would increase about 200K; the hiring of temp census workers and some weather related hiring being the catalysts. However, markets were also expecting an increase in good permanent jobs along with census hiring; that now is questionable for the moment after the ADP data. Today’s ADP report showed a decrease of 51,000 workers in goods-producing industries including manufacturers and construction companies. Service providers added 28,000 workers (you want that in a combo meal?). At 9:00 this morning on the reaction to the jobs data had the 10 yr note +9/32 at 3.83% -3 bp, mortgage prices at 9:00 +5/32 (.15 bp) and the DJIA futures trade had the index -38 points. At 9:30 the stock market opened (DJIA) -25, 10 yr note +8/32 3.83% -3 BP and mortgage prices up just 2/32 (.06 bp).
More data: at 9:45 the March Chicago purchasing mgrs index, expected at 61.0 frm 62.6 in Feb, fell to 58.8; new orders fell to 61.8 frm 62.2, not much; employment index was essentially unchanged at 531. frm 53.0 in Feb. Any index reading over 50 indicates expansion. There was no reaction to the weaker mid-west data.
Finally this morning; at 10:00 Feb factory orders, expected up 0.5%, was up 0.6%.
The soft ADP jobs report has rattled most economists and shaken the bullish optimism that the employment sector is beginning to improve; whether it actually changes that sentiment will have to wait until Friday’s BLS data. Most of the chatter from those on CNBC this morning tried to dismiss the report, favoring to make a silk purse out of the hiring of census workers as something more significant than it is. For the next few months the government will be hiring more census workers, putting an unreasonable spin on temp workers. It is critical to keep in mind that the employment situation is not being reported correctly, leaving out the discouraged workers that have given up; added in to the real world the unemployment rate in the US now is closer to 17% to 20% than the 9.7% on the headline Friday. Put the Q4 productivity in play at +6.9% and unit labor costs -5.9% and employers have little reason to crank up a lot of new hiring. While we are not as enthusiastic as the overall sentiment about job growth, we are to some extent the Lone Rangers (again), we are not alone however. There are an increasing number of money managers beginning to focus on the reality that unemployment is very high and most important, not expecting much improvement this year.
This is the last day of quantative easing by the Fed; the end of the $1.25T of MBS purchases. Will it make a difference in the markets? in the mortgage rates? So far no meaningful market movements in either direction on the ending of all those handouts tossed at those that came close to blowing up the entire global financial markets. Looking back over the last two years, much of the government largesse was wasted and unnecessary; but at the moment there was little choice.
Nothing more for the markets today; we don’t expect much change in the stock, bond and mortgage markets now through the rest of the session with that elephant coming on Friday. Mortgage markets had been relatively firm against treasuries until yesterday and today; mortgage markets are not doing well this morning considering the weak data and that the 10 yr note is firm. |
