Equity futures are lower and bonds are better on Wednesday morning as investors await key indicators on employment and the services industry.
Ninety minutes before the opening bell, S&P 500 futures are 7.25 points lower at 1,258 and Dow futures are 60 points down at 11,559. Each index hit a 26-month high earlier this week.
Commodity prices are mixed. Light crude oil is 0.95% down at $88.53 per barrel and gold prices are up 0.21% at $1,381.60 per ounce.
Meantime, Treasuries are strengthening. The benchmark 10-year Treasury is currently yielding 3.30%, five basis points lower than yesterday.
Earlier today, the Mortgage Bankers Association released two weeks of loan application volume. Overall, applications fell 3.9% in the week ending Dec. 24 but then rose 2.4% in the final week of the year. Both figures are seasonally-adjusted.
Refinancings decreased 7.2% in the first week while purchases advanced 3.1%. In the second week, refinancings rebounded 3.9% but purchases fell 0.8%.
The average interest rate for a 30-year fixed-rate mortgage closed the year at 4.82%.
Before the indexes were released, economists at BTMU said 2011 is unlikely to be the year for a housing recovery, even though the dynamics would favor potential buyers locking in low mortgage rates now.
“Home affordability remains near an all-time high even though mortgage rates have risen from a record low of 4.17% in the week of November 12th to 4.81% in the week of December 24th,” they wrote.
“Rising mortgage rates may even act as a catalyst for home sales if buyers believe rates are only going up giving more import to buying now,” they added. “Prices are also very attractive, but now that they are falling again it could actually be a deterrent for home buying because who wants to buy a major asset that could very well fall further in value?”
Aside from new economic data, the House of Representatives reconvenes today.
“The Republicans have President Obama’s healthcare overhaul firmly in their sights,” reports Thomson Reuters. “They are expected to vote to repeal it, but the initiative will probably be blocked by the Democratic-controlled Senate.”
Key Events Today:
8:15 ― Economists look to see 100k new private-sector jobs in the ADP Employment Report for December. The survey last indicated that 93k private jobs were added to the economy in November ― the most in two years ― after a gain of 82k a month before. However, the “official” BLS report showed only 50k new private jobs in November, so it’s not clear how seriously the market will take this report.
Still, some economists believe the low number of jobless claims in recent weeks suggests some upward revision to the BLS report, which could mean the ADP report last month was right after all.
“Our model, based on jobless claims, the help wanted index and ISM employment, suggests the survey will report private payrolls rising by about 124k or so, after a 93k increase in November,” said economists at High Frequency Economics.
Forecasts range from 30k to 150k, according to 14 economists polled by Thomson Reuters.
10:00 ― The ISM Non-manufacturing Index, a measure of the services, financial, and construction industries, is predicted to rise half a point to 55.5 in December. Any score above 50 indicates growth, and the 0.7 point climb last month meant the sector expanded at its fastest pace since May. New orders picked up one point to 57.7, the highest in seven months, and the employment component improved to 52.7 ― its strongest reading since October 2007.
“Cross currents continue to move in both directions, with financial markets, employment conditions and business activity improving,” said economists at IHS Global Insight. “However, orders momentum remains modest and freight activity is taking a step back after a couple of months of gains. On net, we are looking for a modest gain in the overall index.”
10:15 - The Fed will purchase an estimated $1.5 - 2.5 billion in Treasury coupons maturing between 8/15/2028 and 11/15/2040
1:00 ― Thomas Hoenig, president of the Kansas City Fed, speaks before event hosted by The Central Exchange.