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Daily Market Analysis May 6, 2022

May 6th, 2022 10:39 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

April employment data at 8:30 am ET this morning: unemployment rate 3.6% as expected, non-farm payrolls expected at 400K increased to 428K, private jobs expected at 390K increased 406K, average hourly earnings were thought to be +0.4% were up 0.3% from +0.5% in March, yr./yr. +5.5% as thought, the labor participation rate was at 62.2% down from 6.4% in March. Prior to the 8:30 am release the 10 yr. was at 3.05%, by 8:45 am 3.07% +2 bps .MBS prices prior to the report were down 22 bps, by 8:45 -33 bps.

The number of new jobs, private jobs and the unemployment rate were within ranges, the weaker labor participation rate does get focus and it slipped 0.02%. The decline in average hourly earnings from +0.5% (revised from 0.4%) to +0.3% suggests some softness although focusing too much on one decline isn’t worth much with yr./yr. unchanged from 5.5%. Focusing on the labor participation rate dipping implies the labor market remains tight.

The labor force participation rate -- the share of the population that is working or looking for work -- fell to 62.2%, the lowest in three months, and the rate for workers ages 25-54 edged lower. That makes the Fed’s job more complicated in trying to bring labor demand in line with supply.

Almost every central bank is, or will, increase rates. The ECB talking about a two-year recession coming still has not moved, news is the ECB will increase rate at the June meeting. The Bank of England sees two years of economic stagnation and almost 600,000 U.K. job losses as the price for taming inflation.

Is inflation moderating, recent data has implied it is slowing? Puts the Fed in a difficult vice; going into Wednesday’s FOMC meeting there were worries (and fears) the Fed would increase the FF rate by 75 bps to show aggressive evidence that the Fed is going to the matt to curb inflation. Not sure what led to that idea, but it didn’t make much sense, even though the Fed is taking deserved heat for falling way behind its responsibility to keep inflation from climbing as it has recently, a 75 bp increase would have implied the Fed is panicking, a panicky Fed would create even more angst than already exists. The Fed will need to raise short-term interest rates to at least 3.5% to control inflation, according to former Vice Chairman Richard Clarida.

On China, it is committed to zero COVID, closing much of its economy, China’s economic folks met yesterday, few investing in China recently, particularly using borrowed money, the Yuan this morning weakened past $6.7 per dollar offshore for the first time in 18 months, reigniting a depreciation cycle that historically has gone hand in hand with global equity declines.

At 9:30 am the DJIA opened -200 after falling 1,063 yesterday, NASDAQ opened -72, S&P -20. 10 yr. at 9:30 3.11% +5 bps.5

At 10 am FNMA 4.5 30 yr. coupon -14 bp (-33 bp from 10:00 am yesterday; 10 yr. 3.06% unch)

Nothing else scheduled today. Stocks and bond markets remain subject to very high uncertainty on a day-to-day basis.

PRICES @ 10:00 AM

10 yr note: 3.07% +1 bp

5 yr note: 3.00% -3 bp

2 Yr note: 2.65% -7 bp

30 yr bond: 3.17% unch

Libor Rates: 1 mo 0.845%; 3 mo 1.370%; 6 mo 1.972%; 1 yr 2.672% (5/5/22)

30 yr FNMA 4.0: 98.95 -19 bp (-36 bp from 10:00 am yesterday)

30 yr FNMA 4.5: 101.19 -14 bp (-33 b p from 10:00 am yesterday)

30 yr GNMA 4.0: 99.80 -12 bp (-29 bp from 10:00 am yesterday)

Dollar/Yuan: $6.6708 +$0.0151

Dollar/Yen: 130.29 +0.13 yen

Dollar/Euro: $1.0583 +$0.0042

Dollar Index: 103.53 -0.23

Gold: $1881.80 +$6.10

Bitcoin: 35,630 -802

Crude Oil: $108.83 +$0.57

DJIA: 32,570 -490

NASDAQ: 12,028 -289

S&P 500: 4070 -77

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on May 6th, 2022 10:39 AM

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