Are We Headed For Lower Rates?

People have been asking where the market is trending. We are seeing a lot of economic bad news which tends to be Bond friendly. This morning GDP reported well below expectations at 2.2% and inflation rose at 2.4%. Slower growth and higher inflation is NOT GOOD for this fragile economy. The chart below shows the recent 'up escalator' trend line but the blue horizontal line is the ceiling of resistance. If Bonds break above this line rates could come down a bit but if prices pull back there is a lot of room to fall. Share this with anyone you know who is buying or refinancing a home.

March State-By-State Unemployment

Featured Chart for Monday, April 23rd
March State-by-State Unemployment

Regional and state unemployment rates were little changed in March. Thirty states recorded unemployment rate decreases, 8 states posted rate increases, and 12 states and the District of Columbia had no change.

March Housing Starts

The Commerce Department reported yesterday that Housing Starts fell 5.8% in March to 654,000 on an annualized basis as the troubled housing markets continue to hover near the bottom. On a positive note, Housing Starts are up 10.3% above the March 2011 rate of 593,000 as evidenced by the chart below. Housing Starts are the number of residential building construction projects in a monthly period released by the Commerce Department in conjunction with the U.S. Census Bureau.

March CPI rises to 0.3%, Core CPI at 0.2%, both inline with estimates. Although these numbers were inline with expectations the Inflation numbers are now at the upper end of the range that the Fed uses to measure inflation.

The Consumer Price Index (CPI) is a measure of the average price level paid by urban consumers (80% of population) for a fixed basket of goods and services. It reports price changes in over 200 categories. The CPI also includes various user fees and taxes directly associated with the prices of specific goods and services.

Initial Jobless Claims Week Ending April 7th

Initial jobless claims increased 13,000 to 380,000 for the week ending April 7. This marks the highest level since January, and the second highest reading for 2012. Jobless Claims from the previous week were also revised up to 367,000, up from 357,000. The 4-week average for jobless claims increased 4,250 to 368,500. The 4-week average is considered a more accurate gauge on labor trends because it smoothes out weekly volatility.

The unemployment rate declined to 8.2%. While that is good news on the one hand the figure does need to be taken with a grain of salt - especially in light of the significant headline jobs creation miss. The reason why: the Labor Force Part...icipation Rate (LFPR), which removes some of the guesstimating and adjustments of the unemployment rate. That number (currently at a 30-year low) is a concern because if the LFPR continues to decline, it means we are seeing a smaller ratio of people working against the overall population. This will be another headwind to our already debt-laden government.

Bonds open higher after yesterday's steep sell-off as investors look for some bargains feeling the plunge was a bit worse than it should have been currently up 35bps. ADP Private Employment in March increased by 209K, just below the estimate of 217K. Stock futures weak after the Fed doesn't signal QE3 coupled with a weak Spanish bond auction, Dow currently down 147 points. The European Central Bank sees downside risks to its economy - inflation risks weaker than expected, which is Bond friendly news. The ISM Service Index falls to 56.0 March from the previous reading of 57.3 and below the 56.7 expected. Cautiously rate floating bias.