Friday 2/6…Nonfarm Payrolls are Out

We just got the release of non farm payrolls and the numbers were worse then expected.  Economist’s where expecting around -550k, but the number came in at -598k.  The unemployment rate was expected to come in at 7.5% but it also came in worse at 7.6%. The nonfarm payrolls drop of 598k is the most since 1974 and the unemployment rate is the highest since 1992.  Since December of 2007, job losses have totaled 3.7 million with almost half of that total occurring in the last 3 months.   We would normally expect to see a rally in fixed income since the data was worse then expected, but on the news mortgage backed securities and treasuries both have sold off and dow futures have started to rally.  This is more then likely in anticipation of the stimulus/spending bill.  The thought process is since the numbers came in worse then expected, Congress will have to pass the stimulus bill sooner then later which is very positive for the dow.  We will have to listen to any speak from Capital Hill today to gauge their reaction as will investors.  If we hear talk of the stimulus not passing soon, that should have a negative effect on the dow and mortgage backed securities should benefit.

Yesterday, mortgage backed securities managed to rally a little bit and close up on the day.  So far this morning, though, they have given back those gains.  The day is still young and plenty of time for things to turn.  I suspect we should see lenders rate sheets slightly worse today by .25 to .375 in discount.  The only good thing I can say for today is TGIF!!

 I will get back to you later today with an update after the market has been open for a while.