Locking Stance

The first of three employment reports was released this morning, with ADP estimating that there were 191,000 new jobs created in the month of March.  This is in-line with the estimates of 193,000.  However, the market mover was the upward revision of February’s report, moving from 139,000 up to 178,000.  This move higher puts ADP’s tracking more in line with the recent BLS reports.  However, the moves higher create questions as to the validity of ADP’s accuracy.  Of course it is easy to show longer term credibility when they move their numbers up each month to match the BLS report.  It will be interesting to see how close the two reports are after the BLS releases their March Jobs Report in Friday.


Factory Orders for the month of February were also announced this morning, showing a growth of 1.6%.  This is higher than the 1.2% expected, and also higher than last month’s revised 1% increase.  Factory Orders are an important gage of longer-term consumer confidence.  It means that retailers are placing more orders in anticipation of higher demand.


The S&P 500 closed at another all-time high yesterday, as the exuberance in the stock market continues.  The headwind of the stock market, combined with the positive economic reports, have pushed mortgage bonds lower.  From a technical standpoint, we are clearly on a down-ward channel.  I anticipate that we will at least take a peak below the current support level.  Hopefully they will ultimately hold up until Friday’s report.  If that report shows strong employment growth, we can expect a sharp drop lower, pushing interest rates higher.


Given the ugly technical picture, combined with the likelihood of a strong jobs report on Friday, we will suggest a locking stance.  There is a good chance that we will see yields move significantly higher by week’s end.  Locking into Friday’s report is suggested.

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