Commentary: Manufacturing accelerated in February to the fastest pace since May 2004 - a sign the manufacturing sector is red-hot right now.
The Institute of Supply Management's factory index increased to 61.4% in February from 60.8% in January. The ISM's measure of new orders rose to its highest level since January 2004 and the employment gauge jumped to its highest mark since January 1973. A measure of prices paid for raw materials edged fractionally higher as well.
Mortgage investors were fairly bored with the details of this report until they got to the employment component. The big reported surge in job creation in the manufacturing sector last month has caused many traders to ramp-up their projections for Friday's nonfarm payroll figure. Yesterday analysts, economists and other market participants were publicizing estimates calling for a net gain of roughly 170,000 new jobs in February - most of those estimates have now been modified to reflect the majority opinion calling for a headline nonfarm payroll number in the neighborhood of 190,000 or more. Sharply improving conditions in the labor sector will make it difficult, if not impossible, for mortgage interest rates to move notably lower from current levels.
Fed Chairman Bernanke's appearance before the Senate Banking Committee this morning to present his appraisal of current economic conditions had no discernable impact on the trend trajectory of mortgage interest rates. As expected, Mr. Bernanke comments were largely interest rate neutral. He went out of his way to suggest he sees little likelihood that rising oil and other commodity prices will cause a permanent increase in broader measures of inflation pressure within the economy. Bernanke will make an encore appearance on Capitol Hill tomorrow to repeat his prepared text testimony to the members of the House Financial Services Committee.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
