|The stock market started on fire this morning, the rate markets began slightly better with the dollar gaining strength. At 8:30 Feb personal income, expected +0.3% was +0.4%, personal spending not as strong, the estimates were for an increase of +0.2%, as reported +0.1%. The PCE was in line. The report didn’t cause any reaction. This morning’s focus is on the currency markets; tomorrow the IMF is scheduled to release data on global foreign-exchange holdings for the fourth quarter of 2014 are likely to show central banks piling into the dollar and lightening up on the euro. Known as Cofer for Currency Composition of Official Foreign Exchange Reserves, the IMF will report more central banks have been moving into the dollar than may have been previously expected. The data are historical rather than forward-looking, fresh gains would bolster expectations that the dollar’s sharpest rally in decades has more room to run as the Federal Reserve prepares to raise interest rates as soon as June.
The equity market is beginning the week with a serious rally; at 9:30 the DJIA opened +130, NASDAQ +35, S&P +12. The 10 at 9:30 1.96% unch and 30 yr MBS prices +11 bp frm Friday’s close and +16 bps frm 9:30 Friday morning. Stocks looking at the dollar’s increase this morning and somewhat less concerned on the turmoil in Yemen that set off the Saudis and Egypt, concerned about the flow of oil through ports boarded on Yemen.
This is employment week; look for volatility to remain at high levels, especially on Thursday.This employment data will be released when markets are closed on Friday, so we won’t see the volatility until next Monday but should have good idea how markets will react to what is highly likely to be data that isn’t close to the current forecasts (+247K NFP and +240K for private jobs). Last month’s employment report sent the 10 yr note yield up 14 bps and dropped MBS prices down 79 bps because the report was stronger than forecasts. It isn’t unusual that the report sets of extreme movement, with traders and investors having to wait the volatility may not be so severe.
At 10:00 Feb pending home sales, expected +0.3% increased 3.1%; the strongest increase since June 2013. Yr/yr p[ending sales up 12%. The surprising gain came mostly frm the mid-west, normally this tie a year the region is slow, sales jumped 11.6% in Feb.
All of our work remains bullish technically, investors and traders are not currently willing to turn on the bond and mortgage markets based on price movement. We floated over the weekend an picked up a few bps in gains. Not looking for any significant moves today, most depends now how the dollar trades through the session. We are friendly to the bond market but with a little trepidation with employment Friday and the continuing debate on when the Fed will begin to tighten. Today’s trade in equities should be seen in the context of the end of the quarter as funds spiff up their quarterly reports.
This Week’s Calendar:
8:30 am Feb personal income and spending (expected +0.3% and +0.2%; as reported income +0.4%, spending +0.1%)
10:00 am Feb pending home sales (expected +0.3%, as reported +3.1%)
9:00 am Jan Case/Shiller (+4.6% yr/yr)
9:45 am Mar Chicago Purchasing Mgrs. index (50.2 frm 45.8)
7:00 am weekly MBA mortgage applications
8:15 am ADP Mar private jobs (+230K)
10:00 am Mar ISM manufacturing index (52.5 frm 52.9)
-Feb construction spending (+0.2%)
-No time Mar auto and truck sales (16.8 mil frm 16.2 mil)
8:30 am weekly jobless claims (285K +3K)
-Feb trade deficit (-$41.5B)
10:00 am Feb factory orders (0.0% frm -0.2% in Jan)
8:30 am Mar employment data (unemply. 5.5% unch frm Feb, non-farm payrolls 247K, private jobs +240K, average hourly earnings +0.2%)
PRICES @ 10:10 AM
10 yr note: +5/32 (15 bp) 1.95% -1 bp
5 yr note: +532 (15 bp) 1.40% -3 bp
2 Yr note: +1/32 (3 bp) 0.58% -1 bp
30 yr bond: +3/32 (9 bp) 2.53% unch
Libor Rates: 1 mo 0.177%; 3 mo 0.273%; 6 mo 0.401%; 1 yr 0.699%
30 yr FNMA 3.0 Apr: @9:30 102.05 +11 bp (+16 bp frm 9:30 Friday)
15 yr FNMA 3.0 Apr: @9:30 104.57 +1 bp (++2 bp frm 9:30 Friday)
30 yr GNMA 3.0 Apr: @9:30 102.73 +9 bp (+13 bp frm 9:30 Friday)
Dollar/Yen: 120.00 +0.87 yen
Dollar/Euro: $1.0827 -$0.0062
Gold: $1185.40 -$14.40
Crude Oil: $49.03 +$0.16 (crude was weaker earlier today)
DJIA: 17,984.52 +271.86
NASDAQ: 4930.59 +39.37
S&P 500: 2081.91 +20.83