Morning Report: Strong jobs report

Posted on October 4, 2024 by Brent Nyitray

Vital Statistics:

Stocks are higher this morning after a strong jobs report. Bonds and MBS are getting slammed.

The port strike has been suspended as the ports and Longshoreman’s union extended their contract through to Jan 15. The issue was almost certainly unhelpful to the Democrats for the upcoming election, so the fight has been tabled until it is over.

The economy added 254,000 jobs in September, according to the Employment Situation Report. This was well above the Street expectations of 132,000. The unemployment rate ticked down to 4.1%. The employment-population ratio ticked up, while the labor force participation rate was flat.

Average hourly earnings rose 4%, which was well above the 3.7% expectation. Overall, it was a strong report.

The early reaction in the bond market was negative, as it gives the Fed more leeway to move cautiously with rate cuts. The 10 year spiked to 3.99% before falling back.

The Fed Funds futures currently see 25 basis points in November and another in December.

The services economy expanded in September, according to the ISM Services Report. “The increase in the Services PMI® in September was driven by boosts of more than 6 percentage points for both the Business Activity and New Orders indexes. The Employment and Supplier Deliveries indexes had mixed results, with a 2.1-percent decrease and 2.5-percent increase, respectively. The Supplier Deliveries Index returned to expansion in September, indicating slower delivery performance. The stronger growth indicated by the index data was generally supported by panelists’ comments; however, concerns over political uncertainty are more prevalent than last month. Pricing of supplies remains an issue with supply chains continuing to stabilize; one respondent voiced concern over potential port labor issues. The interest-rate cut was welcomed; however, labor costs and availability continue to be a concern across most industries.”

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Morning Report: Consumer confidence falls on weakening labor outlook

Posted on September 25, 2024 by Brent Nyitray

Vital Statistics:

Stocks are flat this morning on no real news. Bonds and MBS are flat as well.

Home prices hit a new record, according to the Case-Shiller Home Price Index. Prices rose 5.0% year-over-year in July, a deceleration from the 5.5% recorded in June. New York City led the charge, followed by Las Vegas and Los Angeles. “We continue to observe outperformance in most low-price tiers in the market on a three- and five-year horizon,” Luke continued. “The low-price tier of Tampa was the best performing market nationally with five-year performance of 88%. The New York market was the best market annually, posting a gain of 8.9%. New York’s low-tier index, which include home values up to $533,000, helped drive that growth with 10.8% annual gains. Over five years, markets such as New York and Atlanta saw low-price-tiered indices outperforming their market by as much as 20% and 18%, respectively. The relative outperformance of low-price-tiered indices has both benefited first-time homebuyers as well as made it more difficult for those looking for a starter home. The opposite is happening in California, which has the most expensive high-price tiers in the nation, all well over $1 million. The rich are getting richer in San Diego, Los Angeles, and San Francisco where their high-price-tiered indices outperformed on a one- and three-year basis.”

Consumer confidence declined in September, according to the Conference Board. “Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “September’s decline was the largest since August 2021 and all five components of the Index deteriorated. Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income.

The Present Situation Index has moved down markedly over the summer and continues to fall. Inflationary expectations remained elevated at 5.2%.

Mortgage applications rose 11% last week as purchases rose 1.4% and refis rose 20%. “Mortgage applications increased to their highest level since July 2022, boosted by a 20 percent increase in refinance applications after a large increase the prior week. The 30-year fixed rate decreased for the eighth straight week to 6.13 percent, while the FHA rate decreased to 5.99 percent, breaking the psychologically important 6 percent level,” Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As a result of lower rates, week-over-week gains for both conventional and government refinance applications increased sharply. The refinance share of applications is now at 55.7 percent, and while the level of refinance activity is still modest compared to prior refi waves, they now account for the majority of applications, given the seasonal slowdown in purchase activity.”

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