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Market Report 5/4/12: Orange County, CA

This market report will provide the data and insight from trading on Wall Street. Interest rates are derived from the yield on mortgage backed securities (bonds). When the pricing of mortgage backed securities (MBS) goes up you can expect lower interest rates. When MBS pricing goes down, expect higher pricing on interest rates for home mortgages. 

Today’s market report revolves around the  weak employment reports that came in today. The unemployment rate fell to 8.1% with 115,000 new jobs created this month. As far as the 8.1% unemployment rate is concerned, it fell for all the wrong reasons.  First, 342K people left the labor force, bringing the population/employment ratio to 58.4%. Wow! Just over half of the population is actually employed. That’s the lowest level since October and just .2% above a 29 year low.  Simply put, labor demand is weak. People who have been unemployed for a period of time have stopped looking for work, taken two part time jobs to replace the one they lost, or have become stay at home dads and moms since being laid off.

As for the market reaction?  With 30 minutes to go in trading for the day, the Dow Jones is currently off 168 points, 10 year Treasury note up 13/32’s to yield 1.91%. Technically, the buying today in treasuries created a new high close for the year (lowest yield).  Mortgage backed securities up 3 to 4/32’s (baby rally). Overall, we like the market but feel that most of the rally is behind us. Market momentum is starting to weaken.  Be careful with your expectations.  Mortgage backed securities are doing okay but not getting the bang that treasury bonds are seeing.

 Watch the elections in France and Greece over the weekend.  They could be market movers come Monday morning.

Scott Storace

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