ADP Report Strong for February

Market volatility remains high as investors grapple over feelings regarding the risks of the coronavirus.  As stocks bounce up and down, mortgage bonds are starting to tremble and show signs of volatility.  With bonds signaling a serious “over-bought” state, there is great risk of a pull-back for bond prices.  That would be a healthy move as this rally has gone on so long that it would now be considered an unhealthy move higher.  A pullback would allow the market to take a break before making another attempt to push prices higher.  If we don’t see a temporary pull-back, chances of a significant move are inflated.  That would not be good news for mortgage interest rates.

This morning’s ADP employment report for the month of February shows 183,000 new jobs were created.  This is higher than the 165,000 the market had anticipated, and shows that the labor market remains strong.  However, there were 82,000 jobs subtracted from January’s report, which takes out a lot of steam of today’s report.  It will be interesting to see how job growth in March turns out.  With many retailers expecting a slowdown, I expect to see weaker reports in the months to come as we hear of continued spreading of the coronavirus.  Many businesses are already feeling the negative impact.  It will take a bit for the full impact to hit the economy.

Although there is no need to immediately rush to lock, I feel a pull-back will come soon.  Float only if you are able to closely watch the markets.