Mortgage Bonds opened much lower this morning, but erased those early losses after the Labor Department reported that the Unemployment Rate jumped to 5.5% from last month’s reading of 5%. The 1/2 point rise was the biggest increase since February of 1986, while the unemployment rate is the highest since October of 2004. Estimates were looking for a 5% rate. Although the jump in the unemployment rate is getting a lot of attention, remember that the rate was at 5.2% a month earlier. So while the change is negative, it is not as dramatic as the media is portraying.
The US lost jobs in May for a fifth month in a row as payrolls fell by 49,000 versus estimates of -60,000 after a revised upwards 28,000 decline in April. The economy has lost 324,000 jobs so far this year. The total revisions subtracted 15,000 Jobs previously reported for March and April. Overall, the job creations were better than forecast , but the big jump in the unemployment rate pushed Stocks much lower and gave a boost to Mortgage Bonds.
Oil prices are soaring to over $134 per barrel after comments made from European Central Bank (ECB) President Jean-Claude Trichet. Trichet signaled the ECB may raise interest rates and this caused the Euro to strengthen against the US Dollar. When interest rates fall in the US or rise in Europe, the Dollar weakens against the Euro and drives oil prices higher as investors and speculators buy commodities such as oil as a hedge against inflation when the Dollar is falling. Surging oil prices could negatively impact the both Stocks and Bonds.
