Daily Commentary by Larry Baer: Stock prices around the world soared and interest rates crept higher following a surprise emergency move by the U.S. Federal Reserve, the European Central Bank, the Bank of Japan, and the central banks of Britain, Canada and Switzerland to stabilize the global banking system. The coordinated effort will make it easier and cheaper for liquidity starved European banks to swap Euros for dollars. This facility will, at least temporarily, stave off a return of the 2008 credit freeze that plunged most of the world's major economies into recession.
The start of the day was full of surprises. Not to be outdone, earlier this morning China's central bank cut the reserve requirement ratio for its commercial lenders for the first-time in nearly three years to ease credit strains there and to shore up an economy running at its weakest pace since 2009.
Here at home the private ADP National Employment report indicated the pace of job growth accelerated by a stronger than expected 206,000 jobs in November. This data is notorious for falling widely on either side of the government's far more important nonfarm payroll figures. Even so, many analysts took the ADP at face value and ramped up their forecasts for Friday's headline November nonfarm payroll figure to 127,000. These refigured forecasts were just strong enough to cause mortgage investors to nudge mortgage interest rates fractionally higher in today's early going.
The Labor Department's release of the revised third-quarter Productivity and Unit Labor Costs figures also suggested hiring may be accelerating more than many now anticipate. Nonfarm productivity in the third-quarter rose 2.3% rather than the 3.1% gain initially reported. The drop in productivity, many times an early sign of growing inflation pressures, was largely offset by a drop in Unit Labor Cost of 2.5% -- even lower than the 2.4% decline first reported. The "so what" factor behind all this mumbo-jumbo is that companies are likely to boost hiring into 2012 since demand remains high, balance sheets are pristine and labor costs remain well below their peak set in late 2008.
For those that may be interested - the Mortgage Bankers of America have released their Mortgage Application Survey for the week ended November 25th. The composite index fell 11.7% for the period - pulled down by a 15.3% drop in the number of refinance applications taken. The number of purchase applications slipped 0.8% lower. The contract rate for 30-year fixed-rate conforming mortgages finished at 4.21%, down 2 basis-points from the prior week and down 11 basis-points from the month-ago mark. Refinance requests accounted for 7 out of every 10 applications taken during the survey period.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
