Mortgage Rates Heading Higher, September 3, 2010

Mortgage Rate Trend Direction:     Up

Economic Reports/Rate Impact:    Non-Farm Payrolls, 8:30 AM ET, High Rate Impact

                                                              ISM Services Index, 10:00 AM ET, Moderate rate Impact

Key News:                                          Renewed Bank Concerns

Summary

The monthly Non-Farm Payroll Report is the most important economic report.  Today is the day that we get this monthly guage on the jobs market.  Results of this report will not only guide markets today, but will prove influencial for days or even weeks to come.  Expect big market moves today prior to the long holiday weekend.  Mortgage rates may have turned the corner from historic lows and may now be on an extended climb upward.  It may not be steady, but my sense is that today may be the start of a higher rate trend.

Impact of economic reports

The Non-Farm Payroll report surprised analysts this morning with a lower overall drop in employment than expected and a much greater than anticipated rise in private sector employment.  The ending of temporary Census jobs was anticipated, yet growth in private sector employment was not.  With most analysts expecting US corporations to fair better in the fourth quarter, employment numbers may pick up from here.  This is the key data point that moves the stock and bond markets.

At 10:00 AM ET the ISM Services Index will be released.  Any sign of improvement in service sector activity may add further fuel to the markets today.

Impact of international or political events

Recent reports have surfaced that indicate the banking sector in both the US and Europe may still face possible peril.  Nuriel Roubini, a well known economist, called "Dr. Doom" by many in the financial media, has stated that he believes global economic weakness may cause hundreds of small to midsize banks in the US to fail over the next year.  He also believes that larger banks in Europe are at significant risk as well.  Another report suggests that business are avoiding use of many Euorpean banks over fears of potential failure.