March employment data at 8:30 am ET, was much worse than forecasts, but the forecasts were meaningless since the virus can’t be accurately quantified. The unemployment rate increased to 4.4% from 3.5% (likely understated), non-farm job losses 701K, private job losses 713K, and manufacturing jobs -18K. Average hourly earnings expected +0.2% increased 0.4%, yr/yr +3.1%. The labor participation rate dropped to 62.7% from 63.4%. The participation rate had been steady at 63.2 or 3%. The data as a whole is probably understated; the BLS collected the data as of March 12th.
President Trump said yesterday he spoke to Russia and the Saudis about cutting output by 10 million barrels a day to stop the collapse of oil prices. The president tweeted that he spoke with Crown Prince Mohammed Bin Salman, who had talked with Vladimir Putin. The kingdom didn’t confirm a cut but did call for an urgent OPEC+ meeting, state-run media reported. But a Kremlin spokesman said the Russian president hasn’t spoken to the crown prince or agreed to cut supply. Nevertheless, crude increased 25% yesterday, and this morning up another 11%.
Today the $349B small business rescue gets underway; should be a massive number filing for assistance, but lenders complained they lacked sufficient guidance from the Small Business Administration on how to process them. While new rules were issued late yesterday, it wasn’t clear how quickly lenders would be able to comply with them or how many would participate because of what some see as disadvantageous terms. The demand expected to far outstrip available funding, mom-and-pop shops will be at risk of losing out. The 30 million small businesses in the US employ half of the private workforce, and their collapse would have long-lasting effects across the country.
The MBS markets have settled down this week. After weeks of extreme price swings, it appears the market has somewhat returned to normal, at least for the moment. We’re not seeing the 50 to 100 bps moves this week. That is good news, but there is still a log jam at the lender levels to process the refinance rush, and there are still some funding issues.
At 9:30 am ET, the DJIA opened -50, NASDAQ -6, S&P -3. 10 yr note unchanged at 0.60%. MBS price for FNMA 3.0 coupon +8 bps from yesterday’s close and +36 bps from 9:30 yesterday.
At 10:00 am ET, the March ISM non-manufacturing index was expected at 43.0 from 57.3 in Feb; as released, it was better, at 52.5; still above 50 indicating expansion. A nice report but don’t pay a lot of attention to it; the index will decline. ISM surveys more than 375 firms from numerous sectors across the United States for its non-manufacturing index. This index covers services, construction, mining, agriculture, forestry, and fishing and hunting. The non-manufacturing composite index has four equally weighted components: business activity (closely related to a production index), new orders, employment, and supplier deliveries (also known as vendor performance). The first three components are seasonally adjusted, but the supplier deliveries index does not have statistically significant seasonality and is not adjusted.
Source: TBWS
