Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
This morning the Bureau of Labor Statistics released October's jobs figures, and while analyst had been expecting 120,000 new jobs to be added to the economy in the month, the actual figure came to 204,000. Furthermore, the numbers for August and September were both revised higher by a combined 60,000. This news has sent the major indexes higher, as investors are more confident in the overall health of the economy. As of 12:45 p.m. EST the Dow Jones Industrial Average (DJINDICES:^DJI) is up 82 points, or 0.53%, while the S&P 500 has climbed 0.83% and the NASDAQ is up 1.27%.
While investors are pushing stocks higher on the jobs numbers, interest rates are also jumping higher today as investors speculate that the Federal Reserve will not soon begin tapering due to the much better-than-expected employment figure. Currently, the five-year Treasury bond is yielding 1.41%, up from 1.31%, while the 10-year and 30-year T-Bills have climbed to 2.75% and 3.84%, respectively, which is up from 2.61% and 3.73%.
But while interest rates move higher, the housing-related stocks are declining. Within the Dow, shares of Home Depot (NYSE:HD) are down 0.8%, while homebuilders Lennar (NYSE:LEN) and Pulte are down 4.6% and 4.5%, respectively. The theory behind these moves is that when interest rates go higher, it becomes more expensive for potential homeowners to buy a home, and thus fewer units will be sold by the builders. As for Home Depot, the stronger the housing market and the higher the number of new homeowners, the better the company will perform. And again, higher rates mean fewer new homes sold and a lower number of potential new customers.
Furthermore, while interest rates on Treasury Bonds inch higher; it makes those investments more attractive to conservative investors looking for safe, consistent growth. Over the past few years, as interest rates have fallen, yield-hungry investors have flocked to the Dow's big, safe dividend-payers. But now that the tide is shifting, those same investors are now moving back out of stocks and into the safety of bonds. This is likely one of the reasons shares of big yielders AT&T (NYSE:T) and Verizon (NYSE:VZ) are down about 1% each this afternoon.