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Daily Market Analysis November 3, 2022

November 3rd, 2022 12:24 PM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

Yesterday the long-awaited FOMC meeting and Powell’s press conference that was expected to verify what markets were thinking, that the Fed was ready to pivot and begin backing off its strong and rapid rate increases. It didn’t happen, Powell at his presser implied the Fed wasn’t near done increasing rates, saying the Fed has a long way to go. Powell’s warning that the Federal Reserve would raise interest rates more than previously anticipated sapped risk appetite. Pointing out the economy is still resilient, and inflation must be corralled. He told markets to stop obsessing over how fast rates are rising and start focusing on how high they get, adding that the final end for the Fed’s interest-rate target—dubbed the “terminal rate”—is going up.

Yesterday the 10 yr. note that traded yesterday morning at 3.95% after Powell increased to end the day at 4.11% +7 bps and MBS prices plunged 36 bps. Early this morning the 10 yr. at 4.21% +10 bps and MBS prices began 61 bps lower.

A recession is on the way, higher rates seen as almost guaranteeing it. The odds of a US recession are rising and the chances it will be mild are falling. The interpretation in markets at this moment is the Fed isn’t in a mood to try and keep a recession from happening until inflation begins to decline. Until the press conference it was widely thought the Fed had leeway to begin slowing the rate increases.

This morning more evidence that the job markets continue to hold well, weekly jobless claims at 217K was in line with estimates and remains close to claims prior to the pandemic. Tomorrow October employment data is expected show the unemployment rate at 3.6% up from 3.5% in Sept.

The Bank of England increased its base rate this morning by 75 bps. In the statement the BOE said markets shouldn’t bet on another 75 bp increase on future increases warning that following that path would induce a two-year recession.

European Central Bank President Christine Lagarde warned on Thursday that a “mild recession” is possible but that it wouldn’t be sufficient in itself to stem soaring prices.

Q3 productivity and unit labor costs, productivity expected +0.5% was up just 0.3%; unit labor costs thought to be +4.0% increased 3.5%.

At 9:30 am the DJIA opened -260, NASDAQ -135, S&P -43. FNMA 5.5 30 yr. coupon at 9:30 am -48 bps.

At 9:45 am the final October PMI (Purchasing Managers' Index) composite index expected at 46.6 increased to 48.2, services expected at 46.6 increased to 47.8.

At 10 am October ISM non-manufacturing index expected at 55.4 reported at 54.4.

PRICES @ 10:00 AM

10 yr note: 4.17% +6 bp

5 yr note: 4.39% +7 bp

2 Yr note: 4.72% +11 bp

30 yr bond: 4.18% +5 bp

Libor Rates: 1 mo 3.835%; 3 mo 4.508%; 6 mo 4.971%; 1 yr 5.536% (11/2/22)

30 yr FNMA 6.0: @ 10:00 am 99.77 -55 bp (-95 bp from 9:30 am yesterday)

30 yr FNMA 5.5: @ 10:00 am 98.05 -42 bp (-81 bp from 9:30 am yesterday)

30 yr GNMA 5.5: @10:00 am 98.75% -41 bp (-78 bp from 9:30 am yesterday)

Dollar/Yuan: $7.3164 +$0.0266

Dollar/Yen: 148.13 +0.21 yen

Dollar/Euro: $0.9750 -$0.0067

Dollar Index: 113.02 +1.68

Gold: $1621.50 -$28.50

Bitcoin: 20,163 -30

Crude Oil: $88.05 -$1.95

DJIA: 31,762 -386

NASDAQ: 10,330 -194

S&P 500: 3710 -50

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 November 3rd, 2022 12:24 PM

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