Refinances skyrocket, private payrolls jump, and service sector shows strength

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Published Date 3/4/2020

The volatility continues in markets; the stock indexes fell yesterday on the Fed shock rate cut, and this morning the indexes are improving on the Super Tuesday that propelled Joe Biden back into serious contention. A resurgent Biden rolled to victories across the South, Midwest, and New England on the biggest day of voting in the Democratic presidential nomination campaign, setting up a one-on-one battle against Sanders who is leading in California. The interest rate markets in early trade were mostly unchanged.

At 8:15 am ET, ADP reported private jobs in Feb came in stronger than forecasts; +183K against 165K anticipated. January jobs, though, were revised substantially lower than initially reported, from 291K revised down to 209K. Still, February news was mostly before the recent escalation over the virus. According to a Reuters survey of economists, the government report on Friday is likely to show nonfarm payrolls increased by 175,000 jobs last month after surging 225,000 in January. The unemployment rate is forecast steady at 3.6% in February.

Yesterday the Fed shocked markets with an inter-meeting 50 bp rate cut, two weeks before the scheduled meeting, and Powell held out the view there could be another cut at the meeting on March 18th. It's hard to see how cutting rates will stimulate the consumer to spend. The Fed is fighting those Quixotic windmills, trying hard to forestall coming economic softness. The Fed also lowered bank reserve requirements thinking it will allow banks more leeway to lend; will they? Over the last 2 yrs, as the economy roared ahead, banks radically increased interest rates on credit cards that padded their profits. Even a radical increase in fiscal spending isn't going to be the forever answer. Unless the supply chain out of China is increased, the outlook for the economy is going to slow, and inflation may increase on shortages of goods and increased costs of medium and finished goods.

MBA mortgage applications last week were up 15.1%, purchase apps though -3.0% while refinance applications increased 26.0%.

At 10:00 am ET Feb ISM non-manufacturing index was expected at 55.0, it increased to 57.3; once again, historical data.

This afternoon the Fed will release its Beige Book, also data that has little forward guidance.

Source: TBWS

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