Daily Market Commentary
Updated on May 6, 2021 10:01:32 AM EDT Thursday’s bond market has opened in positive territory with stocks showing early weakness and little direction felt from this morning’s economic data. The Dow is currently down 23 points while the Nasdaq has lost 94 points. The bond market is currently up 2/32 (1.56%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.
Last week’s unemployment figures were posted early this morning, revealing 498,000 new claims for benefits. Analysts were expecting to see 530,000, meaning the employment sector was a bit stronger than predicted last week. Accordingly, we should consider the data to be slightly negative for bonds and mortgage rates.
Also posted at 8:30 AM ET was 1st Quarter Productivity and Costs data. It showed that worker productivity rose 5.4% during the first three months of the year after a decline at the end of 2020. This is good news since stronger worker output levels allow for economic growth without rapid inflation worries. The bad news in this report was the 0.3% decline in labor costs. A lower number is traditionally good news because it eases wage inflation concerns. However, forecasts were calling for a much larger decline in costs. Contradicting readings cause us to label this report as neutral for mortgage rates.
Tomorrow brings us what is arguably the single most important monthly economic report. That would be the monthly Employment report for April at 8:30 AM ET. It will give us the U.S. unemployment rate, the number of jobs lost during the month and earnings data. Forecasts are calling for the unemployment rate to have fallen 0.2% to 5.8% and that approximately 950,000 jobs were recovered during the month. Earnings are thought to have risen 0.1%. A higher unemployment rate and a much smaller increase in the payroll number would be good news for bonds and rates because it would indicate weaker than thought conditions in the employment sector of the economy. Bond traders will also be closely watching the earnings figure. Stronger than expected results will probably boost stocks and lead to bond selling, possibly causing an increase in mortgage pricing. Good news for rates would be weaker numbers.
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