04 Dec Locking bias ahead of tomorrows jobs report
After reaching all-time closing highs yesterday, the stock market is beginning the day to the down side. The flow of cash out of the stock market is helping support higher bond prices so far this morning. This is a welcome sign to the mortgage market which has seen a 1/8% increase in interest rates since the week began. With tomorrow morning’s Bureau of Labor Statistics Jobs Report right around the corner, we could see increased volatility in the markets as the day wears on. Many investors may be looking to protect themselves from the potential shock in the market if the report is stronger than anticipated.
Weekly Unemployment Claims for the week ending 11/29/2014 were reported to be 297,000. Although this was a bit higher than the 295,000 anticipated, it represented a drop of 17,000 from last week’s upwardly revised 314,000 figure. This marks 11 out of the past 12 weeks of reports beneath the critical 300,000 point. Overall this is a strong report and shows continued strength in the workforce. Further, claims beneath 300,000 would support a likely monthly increase in the labor market in excess of 200,000.
With the potential market shock ahead of tomorrow’s Jobs Report, we are going to continue with a locking bias. However, with bonds in an oversold position, and with stocks in an overbought position, we may be safe floating into tomorrow’s report. Given the technical picture in both markets, a reaction to a miss may provide better support than deterioration due to a stronger than anticipated report. However, the safe play is still to lock. Volatility is typically exaggerated on Job Report days. Most may not want to stomach the risk of floating.