Daily Commentary by Larry Baer: The devil is always in the detail.
The Commerce
Department reported earlier this morning that personal income soared 2.6%
higher last month - suggesting consumer retail firepower was being restored and
economic growth was poised to leap forward. Stock markets posted
additional gains and the early improvement in the mortgage market faded.
But wait, excluding one-time factors like year-end bonuses and some companies
paying dividends earlier than normal after-tax income rose 0.4% -- not bad -
but not anywhere close to the 2.6% gain media talking heads are breathlessly
reporting. Reading the release just a bit further would have revealed
spending rose a very pedestrian 0.2% last month -- while the core rate of
inflation as measured by the personal consumption expenditure index of the
broader report remained unchanged. Once the dust settled a little - most
mortgage investors shrugged this data off completely.
Initial claims for
government jobless benefits rose more than anticipated during the week ending
January 26th - growing by 38,000 claims. The latest weekly
jobless numbers fall outside of the survey period for tomorrow's much more
important December nonfarm payroll report scheduled for release at 8:30 a.m.
ET. In general, new job creation seems to be holding steady and
projections for a December payroll gain of 160,000 and a steady national
jobless rate of 7.8% certainly seem to fit with the already released weekly
initial claims numbers.
It will likely
take a December headline payroll number of 165,000 or more together with a
national jobless rate of 7.7% or less to induce mortgage investors to push
interest rates notably higher from current levels. A headline number of
150,000 or less and/or a national jobless rate of 7.9% or higher will likely
prove supportive of steady to perhaps fractionally lower mortgage interest
rates.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
