Stocks are significantly higher and mortgage bonds remain in correction mode this morning, as the markets digest all the bad economic news that was released this morning. To begin with, ADP released their estimate of new job creations in the month of May, and the results were terrible. While the market was expecting to see 175,000 new jobs created, the actual report showed only 27,000. This was the worst reading in nearly 9 years and comes at a time when the labor market is generally growing as students enter the workforce for the summer and seasonal hires are in full force. If Friday’s Bureau of Labor Statistics (BLS) report shows a low estimate as well, this could signal the beginning of a downturn in the labor market.
The fact that the stock market is climbing higher today is fascinating. When you think about is, stocks are climbing as more and more people come to the realization that the next Fed rate move will be lower. Although that generally helps the stock market, it is also a sign that the U.S. economy is heading lower. Why would that be a motive for stock investors to step into the market? It truly doesn’t make sense. Stocks should be falling, and mortgage bonds should be climbing higher.
While bonds continue their technical correction, we will maintain a locking bias for loans needing to close soon.