Very cautious float

After days of mortgage bonds struggling, they are moving higher this morning as a lower than anticipated ADP report is helping support lower mortgage interest rates.  While the market was anticipating 175,000 new hires in the month of December, the actual report came in showing 153,000 new jobs reported.  The three-month average has dropped down to 162,000 compared to the summer months which averaged 212,000 new hires.  So clearly, we are seeing a slowing trend in the number of job creations in the US economy.  However, there are seasonal components that must be considered.  But is does create a reason for mild concern. 

The US stock market is mixed this morning, with the Dow currently down 22 points on the day at 19,920.  There has been a great deal of hype surrounding the 20,000 mark, with investors hopeful that once this level is crossed it will continue to move higher from there. 

Markets will closely be scrutinizing tomorrow’s Bureau of Labor Statistics (BLS) Jobs Report.  Now that we have ADP’s numbers, it sets the stage for a possible disappointing number.  Since December was the final full month under President Obama’s watch, he could be going out on a downward slope in the area of job growth.  If the report shows fewer than anticipated hires, we could see mortgage rates come down even more.  We will have to wait and see what happens.

Making a lock or float call prior to a BLS report is a difficult thing to do.  Given today’s data from BLS, we feel there is a strong chance the report will be weak.  However, there is no way to say beforehand for sure.  We are taking a hopeful floating stance going into the report.  However, realize that things could easily go the other direction.