Not much action after this morning's movement after the Jobs Report was released. U.S. employers added 228K new workers last month, above the 190K expected. The Fannie Mae 30-yr 3.5% coupon closed at 102.78, -9bp, and right on support at the 200-day Moving Average. The Dow closed at 24,329.16, +117.68 while the S&P 500 gained 14.52 points to end at 2,651.50, both record high closes. The NASDAQ rose 27.24 points to end at 6,840.08. WTI oil closed at $57.34/barrel, +$0.68. 10-yr yield 2.37%. Next week we will receive inflation data from the Producer and Consumer Price Index but the 2-day Fed meeting will take center stage. Have a great weekend!
Late Morning Review:
Job growth remained solid in November after the brief hiccup in September due to Hurricanes Harvey and Irma. The Bureau of Labor Statistics reports that 228,000 workers were hired last month, above the 190,000 expected. Within the report it showed that the Unemployment Rate remained at 4.1 %, which is considered full employment. However, average hourly earnings disappointed, growing by 0.2% from October to November, below the 0.3% expected. Year-over-year, earnings rose 2.5%, again below the 2.7% expected. In 2017, average monthly job growth eased to 174,000 new jobs per month from 187,000 in 2016.
Mortgage credit availability loosened a bit in November driven in part by a net increase in investor offerings. The Mortgage Bankers Association reports that mortgage credit availability index increased to 182.4 last month, an uptick of 0.8%. An increase in the index indicates that credit availability is loosening, while a decrease signals that lending standards are tightening. The index was bench marked to 100 in March 2012.
The House and Senate approved a measure Thursday to avert a partial government shutdown ahead of the midnight deadline tonight. The bill, also known as a continuing resolution, would keep federal agencies functioning for an additional two weeks through Dec. 22.
MBS closed near unchanged in a lackluster trading session ahead of tomorrow's Jobs Report. The Fannie Mae 30-yr 3.5% coupon closed near unchanged at 102.84. Stocks rose as tech Stocks rebounded and on a report that Congress is passing a spending bill that would avoid a government shutdown. The Dow gained 70.57 points to 24,211.48, the S&P gained 7.71 points to 2,636.98, while the NASDAQ was up 36.46 points to end at 6,812.84. WTI oil ended at $56.61/barrel, +$0.65. The November Jobs Report will be released tomorrow morning at 8:30 a.m. ET. As always, be sure to be tuned in to the Mortgage Market Guide to get the headlines and the market's reaction to the jobs data.
Late Morning Review:
Industry trade group Airlines for America reports that between December 15 and January 4, 51 million passengers around the globe will likely fly on U.S. airlines during the holidays. That represents a rise of 3.5% from last year. The busiest days will be Thursday, December 21; Friday, December 22 and Tuesday, December 26. An improving economy and decent airfares are behind the increase this season.
Mortgage rates edged higher in the latest week though they still remain just above all-time lows. Freddie Mac reports that the 30-year fixed-rate mortgage rose 4 basis points to 3.94% with an average 0.5 in points and fees. The 30-year mortgage rate has been bouncing around in a 10-basis-point range since September. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.
Americans filing for first-time unemployment benefits were little changed in the latest week and continue to hover near the lows seen in the early 1970s. The Labor Department reported that Weekly Initial Jobless Claims fell by 2,000 in the latest week to 236,000. Jobless claims have now remained below the 300,000 threshold for 144 consecutive weeks, a sign of a strong labor market. The numbers come ahead of tomorrow Jobs Report for November where it is expected that 190,000 workers were hired last month.
Not a lot of action in the Mortgage Bond market today as prices opened a bit higher and traded in an extremely tight range during the session. The Fannie Mae 30-yr 3.5% coupon closed at 102.88, +9bp. Stocks took a breather as energy shares dragged and investors looked to book some profits. The Dow fell by 39.73 points to 24,140.91, the S&P was essentially unchanged at 2,629.27 while the NASDAQ gained 14.16 points to end at 6,776.37. WTI oil closed at $55.97/barrel, -$1.65. 10-yr yield 2.33%, unchanged from early this morning. Weekly Initial Jobless Claims will be reported tomorrow.
Late morning review:
Labor market growth continued in November as the sector is now almost at full employment. ADP reports that private payrolls grew by 190,000 in November, in line with estimates and well above levels seen in September after Hurricanes Harvey and Irma ravaged southern Texas and parts of Florida. ADP reported that midsize companies added 99,000 jobs; small businesses, 50,000; and large ones, 41,000. The report comes ahead of the more closely watched Non-farm Payroll report for November on Friday.
The Mortgage Bankers Association (MBA) reports that mortgage rates were essentially unchanged in the latest week and remain just above all-time lows. The 30-year fixed-rate conforming mortgage was at 4.19% with 0.40 points in the week ended December 1. The MBA's Market Composite Index, a measure of total mortgage loan application volume, rose 4.7% from the previous week. The refinance share of applications hit the highest level since September, increasing 9% while the purchase index saw a 2% gain.
Social-networking giant Facebook tops the list for the best place to work in the U.S. in 2018 for the third year in a row. And why not? Look at the perks Facebook provides its employees: The average software engineer earns $126,780 a year — alongside comprehensive benefits and perks, like: four months of paid parental leave for new mothers and fathers, $4,000 for parents for each child birth, pre-school tuition subsidies and lots of free food.
Not a lot of movement in MBS for most of the session aside from some early morning jostling. The weaker than expected ISM Service Index had little impact on the markets. The Fannie Mae 30-yr 3.5% coupon rose 9bp to end at 102.78, right up against resistance at the 200-day Moving Average. The Dow dropped 109.41 points to 24,180.64, the S&P fell by 9.87 points to 2,629.57, while the NASDAQ was down 13.15 points to end at 6,762.21. WTI oil closed at $57.67/barrel, +$0.20. 10-yr yield 2.35%. The November ADP Private Payrolls Report will be released tomorrow morning along with Q3 Productivity.
Late morning review:
Home prices continued to push higher in October fueled by several factors that include a strengthening economy, an acute lack of supply and low home loan rates. Data analytics firm CoreLogic reports that home prices, including distressed sales, surged 7% from October 2016 to October 2017 and were up 0.9% month over month from September to October. Looking ahead, CoreLogic sees a slowing in prices; expectations are for a rise of 4.2% from October 2017 to October 2018.
The Institute for Supply Management (ISM) reported on Tuesday that its ISM Service Index fell to 57.4 in November, down from the 60.1 registered in October. Within the report it showed that both the new orders index and employment components fell, though they still remain historically strong. The report went on to read that 16 out of 17 industries reported growth in November. A reading above 50 indicates the economy is generally expanding; below 50 indicates the sector is generally contracting. November marked the 95th consecutive month the index has been above 50.0.
With the new year quickly approaching here are a few facts to throw at your guests or at your favorite watering hole on New Year's Eve. "Auld Lang Syne" is traditionally sung at midnight on New Year's Eve. "Auld Lang Syne" was written by Scottish poet Robert Burns in 1788. The words "auld lang syne" mean "times gone by." The first ball dropping celebration atop One Times Square was held on December 31, 1907. The original New Year's Eve Ball weighed 700 pounds and was 5 feet in diameter. It was made of iron and wood and was decorated with 100 25-watt light bulbs. In 1942 and 1943 the ball lowering was suspended due to the wartime dimout.
MBS traded in a tight range for most of the session ending near unchanged as Stocks went on a roller coaster ride. The Senate's passing of their tax bill sent Stocks surging in the early going but the gains dissipated as the session wore on. There were no economic reports released today. The Fannie Mae 3.5% coupon closed near unchanged at 102.69, just below resistance after having bounced off support earlier in the day. The Dow closed at a record high of 24,290.05, +58.46 points after being up 300 in the morning session. The S&P fell by 2.78 points to 2,639.44 while the NASDAQ plunged 72.22 points to end at 6,775.36, both weaker on declining tech shares. WTI oil closed at $57.47/barrel, -$0.89. 10-yr yield 2.37%. Tomorrow's economic data is limited to ISM Services.
Late Morning Review:
The Senate passed its version of the tax bill over the weekend and now the House and the Senate will reconcile their respective versions of the tax bill before it becomes a law. The news has sent U.S. Stocks considerably higher to begin the week now that the uncertainty surrounding taxes has ended. The Stock markets will look ahead to Friday's Jobs Report for November where it is expected that employers hired 190,000 new workers during the month.
In corporate news, drugstore chain CVS has agreed to purchase health insurer Aetna in a deal that will change the way large company's purchase health-care benefits. The deal is expected to cost CVS nearly $70 billion and should reduce healthcare costs for consumers, immediately, said the two CEOs of both companies on CNBC this morning. The merger will allow stores to "not be just about products, but also service offerings that can help people on their path to better health," said the two CEOs.
The National Retail Federation reports that from Thanksgiving Day through Cyber Monday, more than 174 million Americans shopped in stores and online during the five-day holiday weekend, beating the 164 million estimated shoppers from an earlier survey. The most popular day for in-store shopping was Black Friday, cited by 77 million consumers, followed by Small Business Saturday with 55 million consumers. In addition, credit cards are the most popular form of payment this year, used by 40% of shoppers, up from 39% last year. That’s tied with debit cards, which is also used by 40%, the same as last year; 18% plan to pay with cash and 2% will use checks.