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June 2020

June 3rd, 2020

Friday - June 5 

 8:33 AM - May Non-Farm Payrolls unexpectedly rise by 2.51 million vs the -8.5 million expected!!! Stock futures add to already big gains. Bonds prices plunging. 10-yr yield rises to .92%.

Thursday - June 4

Market Wrap -Mortgage Bonds closed lower though off their worst levels while the 10-yr yield rose to .82%, the highest close since March 25. The German 10-yr Bund yield ended at .31%. Stocks closed mixed ending a four-day win streak for the S&P. WTI oil ended at $37.42/barrel, near unchanged. Tomorrow brings the Jobs Report. We will not even try to guess what the number will be but it will be ugly after the 20.5 million jobs lost in April. May's expectations are for 8.5M jobs lost and the unemployment rate ticking up to 20%. With the big headline risk associated with the report, you should be locking. Be sure to be tuned in tomorrow morning at 8:30 a.m. ET for the job numbers and the markets reaction.

Late Morning Review - 

The unemployment line continues to grow as the pandemic induced shutdown severely crippled the labor market. Weekly Initial Jobless Claims came in at 1.87 million near expectations. Continuing claims, which provide a clearer picture of how many Americans remain unemployed, totaled 21.5 million, a gain of 649,000 over the past week, also worse than Wall Street expected. 46.5 million people have so far signed up for unemployment benefits. The silver lining? Continuing claims are down by over 3 million over the last 2 weeks.

Mortgage rates continue to hover near record lows this week. Freddie Mac reports that the 30-year fixed-rate mortgage inched higher to 3.18% with 0.7 in points and fees. Freddie Mac says that as the economy is slowly rebounding, all signs continue to point to a solid recovery in home sales activity heading into the summer as prospective buyers jump back into the market. Low mortgage rates are a key factor in this recovery. Last year this time the rate was 3.82%.

8:34 AM - Weekly Initial Jobless Claims 1.87 million, near expectations.

Wednesday - June 3

Market Wrap -  Soaring stocks pushed bond prices lower today as equities gained on signs of an economic rebound. The 10-yr yield rose to close at .75% while Mortgage Bonds ended lower. The Dow ended with a 527 point gain as the major indexes close in on the all-time highs hit in mid-February. WTI oil ended at $37.26/barrel, +$0.45. Weekly Initial Jobless Claims will be released tomorrow morning.

Late Morning Review - 

The home purchase market continues to grow given the low rates and with most states reopening across the country. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage fell five basis points in the latest week to 3.37% with 0.30 in points. The MBA said that the Market Composite Index, a measure of total mortgage loan application volume, fell 3.9%, the Purchase Index surged 5.3% while the Refinance Index fell 8.6%. The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.

Private payrolls saw another big decline in workers in May but not nearly as bad as expected. ADP Private Payrolls saw a loss of 2.76 million workers last month, much better than the loss of 9 million that was expected. Big losses were seen from large businesses and the manufacturing sector. Many economists feel that the worst of the coronavirus layoff are now behind us. The report comes ahead of the government's Jobs Report that will be released on Friday.

Economic activity in the service sector contracted for the second straight month due to the fallout from the pandemic. The Institute of Supply Management (ISM) reports that the ISM Service Index rose to 45.4 in May from 41.8 in April as states began to reopen. A reading above 50 indicates the non-manufacturing sector economy is generally expanding; below 50 indicates the non-manufacturing sector is generally contracting. Within the report, it showed that the employment component produced gains.

The home purchase market continues to grow given the low rates and with most states reopening across the country. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage fell five basis points in the latest week to 3.37% with 0.30 in points. The MBA said that the Market Composite Index, a measure of total mortgage loan application volume, fell 3.9%, the Purchase Index surged 5.3% while the Refinance Index fell 8.6%. The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.

Private payrolls saw another big decline in workers in May but not nearly as bad as expected. ADP Private Payrolls saw a loss of 2.76 million workers last month, much better than the loss of 9 million that was expected. Big losses were seen from large businesses and the manufacturing sector. Many economists feel that the worst of the coronavirus layoff are now behind us. The report comes ahead of the government's Jobs Report that will be released on Friday.

Economic activity in the service sector contracted for the second straight month due to the fallout from the pandemic. The Institute of Supply Management (ISM) reports that the ISM Service Index rose to 45.4 in May from 41.8 in April as states began to reopen. A reading above 50 indicates the non-manufacturing sector economy is generally expanding; below 50 indicates the non-manufacturing sector is generally contracting. Within the report, it showed that the employment component produced gains.

 

8:23 AM - Global stocks continue to push higher as more economies continue to reopen. U.S. stock futures higher. Mortgage Bonds flat, Treasury prices modestly lower. 10-yr yield inches higher to .70%. WTI oil at $36.64/barrel, near unchanged. May ADP Private Payrolls -2.76 million vs the -9 million expected, not much impact

Tuesday - June 2  

Market Wrap - Signs of an economic rebound weighed on bonds and boosted the equity markets. The 10-yr yield inched higher to .68%, in the middle of its .60% - .75% range. WTI oil ended at $36.80/barrel, +$1.36. Tomorrow morning, the May ADP Private Payrolls Report will be released at 8:30 and there is headline risk.

Late Morning Review - CoreLogic reports that home prices nationwide, including distressed sales, rose by 5.4% year over year in April 2020 compared with April 2019 and were up month over month by 1.4% in April 2020 compared with March 2020. Looking ahead, CoreLogic says that home price growth is expected to decelerate with an annual price decline of 1.3% from April 2020 to April 2021. "As employment and economic activity begin to pick up, as it will surely do, we expect housing to be a driver in a national recovery,” said Frank Martell, President and CEO of CoreLogic. Oil prices have rebounded to levels seen in early March as demand increases across the globe with economies reopening. WTI is at $36/barrel, +0.56. The national average price for a regular gallon of gas has risen to near $2 a gallon from $1.78 a month ago as drivers get back in their cars and take to the roads. “Americans are slowly but steadily returning to driving, causing gas prices to increase across the country,” said Jeanette Casselano, AAA spokesperson. “The good news is gas is still cheap. Motorists can fill-up for $2/gallon or less at 70% of gas stations across the country.” Tolerance for risk is on as stocks march higher again today supported by ongoing optimism surrounding an economic recovery, rising oil prices, COVID-19 medical progress while shrugging off social unrest across the country. Americans are starting to get back to life as they venture out to restaurants and retail outlets. On the travel side, airline activity and hotel occupancy rates are picking up some steam. Finally, home purchase activity is on the rise.

 

Monday - June 1  

Market Wrap - The bond markets were on the quiet side today as the week kicked off and ahead of key labor market reports later in the week. Mortgage Bonds ended modestly higher while the 10-yr yield rose slightly to settle at .66%. U.S. stocks ended with gains as investors balanced the optimism of an economic recovery with social unrest and the pandemic, along with U.S.-China tensions. WTI oil closed at $35.28/barrel, -$0.21. Try maintaining a floating stance to start the week.  Be very mindful of the incredible headline risk here - jobs data, the Fed, Trump/China, protests and hope and optimism.

Late Morning Review - Manufacturing activity across the nation inched higher in May from April though still below levels that are seen as expanding due to the pandemic induced shutdown. The national ISM Manufacturing Index rose to 43.1 last month from 41.5 in April. A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting. Within the report, the employment component rose 46 to 32.1. Timothy R. Fiore of the Institute for Supply Management said, "The coronavirus pandemic impacted all manufacturing sectors for the third straight month. May appears to be a transition month, as many panelists and their suppliers returned to work late in the month."

This week's economic calendar will see three key labor market reports hit the wires as the sector has been decimated by the pandemic induced shutdown. The ADP Private Payrolls will be released on Wednesday, Weekly Claims on Thursday and Non-Farm Payrolls on Friday. Stocks begin the new month modestly higher after two straight months of gains after the lows seen on March 23. The yield on the 10-year Note continues to run just above historic lows currently at .66%.