Lots of Data today...
1. Mortgage Applications Rose 3%, the first gain in a month, due to the recent rate drop we had (which is now gone!)
2. ISM Non manufacturing activity survey has come in better than expected at 50.8 up from 41.9 in January. Consensus was for 47.5
The ISM index read at 49.3 versus estimates of 44.6
3. February Factory orders fell 2.5%, which is in line with expectations
4. ADP Employment report (which many people to believe to be a good indicator of the job sector), fell by 23,000 jobs. This is the biggest loss in about five years. Also, January's number was revised down
5. Productivity rose 1.9%, slightly better than estimates of 1.8% while labor costs rose 2.6%, significantly higher than estimated 2.1%. Hello Inflation!
6. Factory Orders Fell 2.5% which was in line with expectations.
Most of this data is not your friend. ISM numbers exceeding expectations at this particular point is, at least, a glimmer of hope for economic growth, or rather, a mitigating factor to the economic slowdown.
The Productivity and costs report basically is a large can of gas for an already very large fire that is inflation concern. That large fire is burning up the low mortgage rates we've had last week. Add to it the glimmer of hope mentioned above and you have stocks advancing today, more fuel to the fire.
So far this morning, the fire has burned off another 10/32nds on the 5.5% coupon and the 6.0% coupon which will send discount points higher this morning by .375 approximately.
Even though the Fed's Beige Book will be released later today, it usually is not a big impact to rates unless there is surprising information therein. Hopefully you read you've been staying tuned since Friday and have gotten your loans locked earlier in the week.
As far now, even though it is always risky to float when rates are worsening, I see the potential for a weaker than expected jobs report on Friday. We knew that rates would probably take this turn for the worse starting on Friday. Now the question is, will it last for a week or a month!? Even if rates trend upward in general for a month, they will do so in a "two steps back, one step forward" manner. So with all the losses in the past 3 days, either tomorrow or Friday (and maybe both!), will be a day with some relief where you might recapture some of the potential cost incurred if you didn't lock last week.
Still, if you have a loan that must close, it's safer not to chance it in this current climate. But we will see some rate improvements some time relatively soon. It's not clear if they can hold or advance in the face of recently horrible inflation concerns though. It's a tough position to be in to try to time the market when it comes to locking, and one would generally hope for some more stability which makes your decision much easier. But when rates are changing over 100bps in discount from week to week, trying to time the market it about all you can do. If you were paying attention last week, you hopefully did that on Friday and are probably feeling like you just got back from a good trip to Vegas. As far as timing the market now (if you must as locking will be better for your blood pressure in weeks to come), I'm looking to tomorrow or Friday for some relief. As for the longer term, that unfortunately, is a "wait and see."
Stay tuned. I'll let you know if there are significant changes.