03 Apr Locking Bias going into Tomorrow’s Release
The second of three employment reports was released this morning, showing that Initial Jobless Claims for last week increased by 16,000 from the week prior up to 326,000. This exceeded estimates of 320,000, but not by much. Tomorrow is the granddaddy of employment reports, when the Bureau of Labor Statistics (BLS) will report their estimate of new job creations for the month of March. The market is anticipating 206,000. However, many believe the actual figure will come in much higher. High or low, it is certain to be a market mover.
The stock market again hit new record highs this morning. The seemingly uncontainable growth is further fueled by a surge of corporate stock buybacks, as CEOs look to make their stock prices attractive to attract short term praise and accolades. However, this short sided behavior is taking cash away from other long term viable growth strategies, such as investment in research & development, as well as employee training and education plans. These are all longer term payoff expenses that don’t help boost stock prices immediately. However, at some point, companies who are looking for short term growth will eventually find themselves falling behind their longer outlook global leaders.
As hoped, mortgage bonds hung on to support yesterday, and are currently a bit higher today. This is encouraging as we go into tomorrow’s employment report. If job growth comes in significantly stronger than anticipated, all bet are off. Current support will not hold, and mortgage rates will likely edge at least .125% higher than they are today. In light of this risk, we suggest locking going into tomorrow’s release.