It's been a big week when it comes to economic news, especially yesterday's news that the Federal Reserve made another .25% cut to the Fed Funds Rate. Typically bonds and home loan rates react poorly to this news due to inflation concerns; however, the Fed's cut was not unanimous and the Fed also indicated their rate-cutting cycle may be over. As a result, Bonds reacted favorably to the Fed's action. In other news, the Core Personal Consumption Expenditure Index, the Fed's favorite inflation gauge, was slightly higher in March and the important year-over-year Core PCE is now at 2.1%, just above the Fed's desired range of 1 to 2%. Also, Initial Jobless Claims were reported at 380,000, much worse than expectations of 360,000. This left the four week moving average of continuing claims at the worst level since early 2004. Tomorrow morning, the monthly Non-Farm Payroll Report is due to be released. Expectations are for a loss of 75,000 jobs, which is pretty bad. This Report is determined by data provided by the Bureau of Labor Statistics, and it uses historical averages for the past several years. In other words, they don't actually count each person that was hired. They use a lot of averaging, historical data and a lot of assumptions. Which is why we typically see many revisions for prior months. So here's the deal - the Job market is bad. But the report will likely paint a better picture than actually exists...until the downward revisions come later. And we should see downward revisions tomorrow from the past two month's reports. So here's my advice - If you are closing within the next week, I recommend locking. If you have more time, and can stomach the volatilty a bit more, I suggest to float. |
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