October 4th, 2019 9:30 AM by Richard Sardella MLO.100007700/NMLS 233568
Before 8:30 am ET, when the Sept employment report was released, stock indexes were a little weaker, and the bond market was unchanged from yesterday. By 9:00 am, the 10 yr note rate remained unchanged, and the stock indexes were slightly better; MBS prices were unchanged.
The Sept unemployment rate expected unchanged at 3.7% declined to 3.5%, non-farm jobs thought to be +145K were +136K, but August NFPs were revised to 168K from 130K. Private jobs though were less than thought at 114K on forecasts of 135K, although August private jobs were revised from 96K to 122k. Average hourly earnings were 0.0% on estimates of +0.3%, yr/yr expected +3.2%, as released +2.9%. Manufacturing jobs declined 2K, not a surprise given the weakness in the manufacturing sector reported on Monday. This evening's news will make a deal out of the fact that the unemployment rate is a 50 yr low. It will play well politically in the present for the current administration. Another key takeaway, though, is that the average hourly earnings growth (actually, there was none) won't play so well economically. The substance of the employment data; job growth OK but is slowing, inflation weakening, GDP growth slowing, and the US economic outlook losing the steam markets were betting on.
No matter how the economic bulls frame the present economy and outlook, it is becoming more difficult as the data is released. Jobs look good so far, but it isn't a stretch to see jobs weakening with not much of a positive outlook in the near term. Today another example adding to many other private companies beginning to cut back. HP is going to cut 9K jobs quickly to change the computer hardware maker with plans to shrink the company's ranks by as much as 16%. Sept manufacturing jobs were down 2K and August manufacturing jobs in contrast to overall jobs data was revised from +3K to +2K.
At 9:30 am ET the DJIA opened +136, NASDAQ +46, S&P +14. 10 yr 1.54% unchanged. MBS prices +5 bps from yesterday's close and +13 bps from 9:30 sm yesterday.
At 2:00 pm ET this afternoon, Jerome Powell will give opening remarks at the "Fed Listens: Perspectives on Maximum Employment and Price Stability" event held by the Federal Reserve Board in Washington, DC.
This week went a long way to convince the Fed to cut the Federal Funds rate again at the end of this month. No inflation, the dollar too strong, and the economic outlook weakening. Markets have already factored a 0.25% Federal Funds cut. Our techs are now in bullish conditions near term, our forecast at the moment is the 10 yr will work down to 1.44%, the first bullish technical test. Fundamentals are also lining up for lower rates ahead. We still haven't noticed any market effects on the impeachment situation. House committees beginning closed-door testimonies and another whistleblower has emerged from the Treasury Dept.
PRICES @ 10:00 AM
10 yr. note: 1.54% unch
5 yr. note: 1.36% +1 bp
2 Yr. note: 1.41% +3 bp
30 yr. bond: 2.02% -2 bp
Libor Rates: 1 mo. 1.989%; 3 mo. 2.043%; 6 mo. 1.985%; 1 yr. 1.914% (10/3/19)
30 yr. FNMA 3.0: @9:30 101.84 +5 bp (+13 bp from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 102.45 +1 bp (+8 bp from 9:30 yesterday)
30 yr. GNMA 3.0: @9:30 103.06 +6 bp (+18 bp from 9:30 yesterday)
Dollar/Yuan: $7.1485 unch (China closed this week)
Dollar/Yen: 107.01 +0.11 yen
Dollar/Euro: $1.0964 unch
Dollar Index: 98.96 +0.09
Gold: $1506.80 -$7.00
Crude Oil: $52.94 +$0.049
DJIA: 26,405.93 +204.89
NASDAQ: 7935.23 +62.96
S&P 500: 2933.35 +22.73
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.