December 4th, 2020 9:48 AM by Richard Sardella MLO.100007700/NMLS 233568
November employment data at 8:30 am ET; fewer jobs, better income, and the unemployment rate declined. The unemployment rate fell to 6.7% from 6.9% in October; the estimate was 6.8%. Non-farm jobs were expected at 500K, as reported 245K, private jobs expected at 590K, as reported 344K, manufacturing jobs were thought to be +40K, as reported 27K. Average hourly earnings were better, +0.3% with forecasts of +0.1%, yr./yr. earnings 4.4%. The labor participation rate declined from 61.7% to 61.5%. The transportation and warehousing sector dominated hiring in this month's report. It added 145,000 jobs in November or 42% of total private-sector gains.
The initial reaction pushed the 10 yr. note yield up 3 bps to 0.94% and MBS prices down 12 bps at 9:00 am ET. Stock indexes increased slightly (DJIA +73 at 9:00 am).
Fewer jobs but lower unemployment rate; people are falling out of the job market, as evident in the labor participation rate. The increase in income is welcome, but the slow growth in manufacturing is troubling, as well as the overall job growth. We said yesterday that the data this morning would increase volatility, and it has in very early activity.
This morning, the offset to the soft employment data is an increased belief that Congress will get a stimulus bill passed. Prospects for a pandemic relief package before the end of the year grew substantially as senior Republicans warmed to the idea of using a $908B proposal from a bipartisan group of lawmakers. Pelosi and Schumer have already endorsed using the bipartisan proposal in negotiations. Utah Senator Mitt Romney: "We're getting more and more support from Republicans and Democrats." It's not only the stimulus bill, but Congress needs to pass another continuing resolution to fund the government by Dec 11th, or there would be a government shut down; that will be passed, and they may tie a stimulus bill into it.
Also supporting markets, 51 vaccine trials are happening worldwide and will be available, maybe within weeks. The U.S. government's first shipment of coronavirus vaccine doses to be divided among states and federal agencies, including the Department of Defense, will fall far short of protecting high priority groups such as healthcare workers, a Reuters analysis has found. The first shipment is expected to cover injections of 3.2 million people, nowhere near enough for the 21 million U.S. healthcare workers. Normal folks like you and me, though, won't be able to get it until late spring.
At 9:30 am ET, the DJIA opened +80, NASDAQ +15, S&P +8. 10 yr. at 9:30 am 0.96% +5 bps. FNMA 2.0 30 yr. coupon at 9:30 am -14 bps from yesterday's close, and -17 bps lower than at 9:30 am yesterday.
There's nothing left on the calendar today. The markets have digested the employment data already. The rest of the session will be focused directly on any news coming from Congress on the stimulus. We are not expecting any breakthroughs today. Next week seems more likely after the weekend conversations in Congress.
PRICES @ 10:00 AM ET
10 yr. note: 0.97% +6 bp
5 yr. note: 0.42% +3 bp
2 Yr. note: 0.16% unch
30 yr. bond: 1.74% +8 bp
Libor Rates: 1 mo. 0.152%; 3 mo. 0.225%; 6 mo. 0.257%; 1 yr. 0.336% (12/3/20)
30 yr. FNMA 2.0: @9:30 103.55 -14 bp (-17 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.80 -6 bp (-3 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.78 -17 bp (-14 bp from 9:30 yesterday)
Dollar/Yuan: $6.5308 -$0.0121
Dollar/Yen: 104.01 +0.17 yen
Dollar/Euro: $1.2162 +$0.0013
Dollar Index: 90.50 -0.21
Gold: $1849.70 +$8.60
Crude Oil: $45.93 +$0.29
DJIA: 30,070 +100
NASDAQ: 12,425 +48
S&P 500: 3684 +17
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.