Morning Report - Jobs Day

Vital Statistics:

	Last	Change	Percent
S&P Futures	1659.7	6.7	0.41%
Eurostoxx Index	2779.6	5.4	0.19%
Oil (WTI)	109.1	0.7	0.66%
LIBOR	0.256	-0.002	-0.66%
US Dollar Index (DXY)	82.13	-0.499	-0.60%
10 Year Govt Bond Yield	2.89%	-0.10%
Current Coupon Ginnie Mae TBA	103	0.7
Current Coupon Fannie Mae TBA	102.6	1.0
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.67

Stocks and bonds are higher after a disappointing jobs report. Bond investors were clearly leaning short in a big way going into the report. The 10 year was trading above 3% before the report, but has moved back down to 2.89%

The jobs report was relatively weak, although the headline unemployment number dropped to 7.3% from 7.4%. Payrolls increased 169k, lower than the 180k the Street was looking for. The prior two months were revised down by a total of 74k. The unemployment rate dropped from 7.4% to 7.3%, while the labor force participation rate dropped to 63.2% from 63.4%. For those keeping score at home, the last time the labor force participation rate was that low, "Miss You" by the Rolling Stones was the #1 song on the hit parade. Weekly earnings rose .2% while weekly hours ticked up by 6 minutes. Overall, a disappointing report.

Where does this report leave us with tapering QE? Since the default path is to start tapering, and some of the other reports are showing strength, I would expect the Fed to make at least a symbolic decrease in purchases, probably in Treasuries and not MBS.