Morning Report: Blowout ADP jobs report

Vital Statistics:

 

Last Change
S&P futures 2945.83 2.3
Eurostoxx index 390.26 -0.72
Oil (WTI) 63.37 -0.27
10 year government bond yield 2.50%
30 year fixed rate mortgage 4.18%

 

Stocks are higher as we await the FOMC decision. Bonds and MBS are up. Markets should be quiet this morning as most of Europe is closed for May Day.

 

Today’s Fed decision is set to be released at 2:00 pm. No changes in policy are expected and it should be a nonevent.

 

Pending Home Sales rose 3.8% in March, according to NAR. Activity increased pretty much everywhere except for the Northeast. Falling mortgage rates have helped boost activity and we are seeing a bit of an improvement in the inventory balance. Pending home sales reached a level of about 5 million, which is the same level as we saw in 2000. We have 50 million more people since then, which means there is a lot of pent-up demand.

 

The ADP jobs report came in at an increase of 275,000 jobs in April. This was well above the Street expectation of 180,000 for Friday’s jobs report. Professional and business services led the charge, and we also saw an increase in construction employment. The service sector added 223,000 jobs, the biggest increase in two years. With the Fed out of the way, 2019 could be better economically than people were thinking. Note that Trump is still jawboning the Fed to cut rates.

 

ADP report

 

Mortgage Applications fell for the fourth straight week, dropping 4.3%. Purchases fell 4% and refis fell 5%. “Mortgage rates were lower last week, with the 30-year fixed rate declining to 4.42 percent, as concerns over global growth, particularly in Germany, outweighed more positive domestic news on first quarter GDP growth and business investment,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Applications to refinance and purchase a home both fell, but purchase activity still remained slightly above year ago levels. The drop in refinances were driven by fewer FHA and VA loan applications, which typically lag the movement of conventional loans.”

 

Freddie Mac bumped up its origination forecast for 2019 by 4% to $1.74 trillion as rates have fallen. They expect the 30 year fixed rate mortgage to be 4.3% at the end of the year, and home price appreciation to moderate to 3.5%.

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