CHM Blog

The Fed wants to see the job market slow to cool wage growth and inflation. This morning at 8:15 am ET ADP released its Dec private jobs; expected an increase of 145K, jobs increased 235K and Nov jobs revised from 127K to 182K. The initial reaction pushed the 10 yr. note up 3 bps and the 2 yr. note +8 bps. ADP jobs tend to deviate from the official BLS data that will hit tomorrow at 8:30 am. The unemployment rate expected unchanged from Nov at 3.7%, private jobs +175K, non-farm jobs +200K. Average hourly earnings +0.4% down from 0.5% in Nov, yr./yr. 5.0% from 5.1%. two surveys make up the BLS number; the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.

At 8:30 am weekly jobless claims added more angst over job growth, expected at 225K but fell to 204K. The 10 yr. increased another 3 bps to 3.75%, the 2 yr. note another 5 bps to 4.46%, MBS prices declined 28 bps at 8:30 am. Seasonally adjusted jobless-claims figures tend to be volatile around holiday periods. The most recent data was the week between the Christmas and New Year’s holidays. The four-week moving average of weekly claims, which smooths out volatility, fell to 213,750, a decrease of 6,750 from the prior week. Continuing claims, which reflect the number of people seeking ongoing unemployment benefits, ticked down to 1,694,000, a decrease of 24,000, in the week ended Dec. 24.

On the other side, Amazon announced it would cut more than 18,000 jobs in the latest sign the tech slump is deepening. The cuts— concentrated in retail and HR—would be the biggest yet by a tech company during the current slowdown but represent just about 1% of Amazon’s workforce. Salesforce also announcing it will cut 10% of its workforce saying it hired too many during the pandemic.

Yesterday the FOMC minutes from the Dec meeting took a lot of wind from the sails from those that were expecting some easing from the Fed in the second half of the year. Once again, to the dismay of optimistic investors, the Fed came down hard on the idea the Fed was close to ending its rate increases if inflation continued above the Fed’s target. Even with the strong Fed remarks the 10 yr. note yield declined 5 bps yesterday and MBS prices were 19 better than Tuesday.

Also released this morning, the Nov US trade deficit, expected -$75.0B, as reported -$61.5B. October revised to -$77.8B from -$78.2B. The smallest trade deficit since September 2020 and it was the result of exports being $5.1B less than October exports and imports being $21.5B less than October imports. The weakness in exports and imports speaks to weakening global demand.

At 9:30 am the DJIA opened -171, NASDAQ -70, S&P -21. 10 yr. at 9:30 am 3.77% +8 bps. FNMA 5.5 30 yr. coupon at 9:30 am -37 bps from yesterday’s close and -36 bps from 9:30 am yesterday.

PRICES @ 10:00 AM

10 yr note: 3.77% +8 bp

5 yr note: 3.96% +12 bp

2 Yr note: 4.47% +13 bp

30 yr bond: 3.85% +5 bp

Libor Rates: 1 mo 4.384%; 3 mo 4.788%; 6 mo 5.133%; 1 yr 5.455% (1/4/23)

30 yr FNMA 6.0: @9:30 am 101.48 -37 bp (-41 bp from 9:30 am yesterday)

030 yr FNMA 5.5: @9:30 am 100.42 -37 bp (-36 bp from 9:30 am yesterday)

30 yr GNMA 5.5: @9:30 am 100.56 -37 bp (-33 bp from 9:30 am yesterday)

Dollar/Yuan: $6.8809 -$0.0077

Dollar/Yen: 133.71 +1.07 yen

Dollar/Euro: $1.0550 -$0.0058

Dollar Index: 104.96 +0.71

Gold: $1840.60 -$18.40 (stronger dollar this morning)

Bitcoin: 16,791 -30

Crude Oil: $72.69 -$0.15

DJIA: 32,909 -360

NASDAQ: 10,354 -105

S&P 500: 3816 -37

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 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.