February 2nd, 2024 2:14 PM by T. Fanning
Hello, happy Friday,
Rates were having a great week until today’s employment reports were released. Employment numbers were MUCH stronger than expected, causing rates to fall back towards last Friday’s numbers. Earlier in the week, the Feds decided to keep rates unchanged. The current consensus is a rate decrease in May. Overall, rates ended mixed, with only minor differences. Next week has very little in terms of economic data scheduled for release with just a single monthly report that we need to be concerned about and it comes late Monday morning (ISM services index). There are a couple of Treasury auctions set for midweek that are likely to impact rates during afternoon trading those days. Now that the FOMC meeting is behind us, so is the mandatory quiet period for Fed members, meaning we will see more individual member headlines in the coming weeks. There is a speaking engagement set for Wednesday morning that is worth watching.*
We offer Conventional, FHA, VA, USDA, Jumbo and regular construction financing. Some of our niches include: Chenoa Fund loans (100% FHA financing); Conventional, FHA and VA 1x Close Construction-Perm; 1.50% Down FHA Advantage Program; CHFA Financing; HomeStyle renovation program; and a Jumbo, 5% down program. We can also do non-traditional programs! To see a detailed list of programs, visit our website: www.homeloanmortgageco.com/mortgageprograms
Last Updated: 2/2/24
Friday's bond market has opened down sharply following a whopper of an Employment report. Stocks are moving but mixed with the Dow down 124 points and the Nasdaq up 126 points. The bond market is currently down 31/32 (4.00%), which should cause an increase of approximately .250 of a discount point in this morning's mortgage rates. If you saw an intraday improvement late Thursday, you will likely see a larger increase this morning than those who did not get a revision.
Today's big economic news was the release of January's Employment report at 8:30 AM ET. It revealed a surprisingly strong 353,000 new jobs last month, blowing past forecasts of 175,000. There were also upward revisions to December and November's payroll numbers that total a combined 126,000. The January unemployment rate held at December's 3.7% when it was expected to rise 0.1%. This is twenty-four consecutive months with U.S. unemployment below 4.0%.
If those numbers weren't bad enough for bonds, the third headline number is arguably the worst of them. January's average hourly earnings spiked 0.6%. This was twice the 0.3% that was predicted. Furthermore, the year-over-year rise in earnings came in up 4.5%, well above forecasts of 4.1%. This means workers are earning more than many had thought, fueling inflation concerns.
The bottom line of this morning's report is that there is almost nothing in it for the bond and mortgage markets to like. It certainly makes the likelihood of a Fed rate cut at their March FOMC meeting somewhere between zero and not a chance. The results also significantly reduce the possibility of getting one at their May meeting. And that is assuming that date over the next few months contradicts this morning's results. If future reports show similar strength in the employment sector, we may not see the Fed start lowering key rates until sometime late this year.
This morning's remaining two reports were uneventful. December's Factory Orders data was released at 10:00 AM ET, showing a 0.2% rise in new orders for durable and non-durable goods. Forecasts had the report up 0.3%, but the small variance from expectations has failed to impact mortgage rates, especially since it followed a key economic release that showed significant surprises.
Closing out this week's activities was January's revised reading to the University of Michigan's Index of Consumer Sentiment, also at 10:00 AM ET. They announced a reading of 79.0 that was a tad higher than the preliminary 78.8 posted two weeks ago. The increase means more surveyed consumers felt better about their own financial situations than thought. Since rising confidence usually translates into stronger consumer spending numbers, the higher reading is technically bad news for rates. However, as with the Factory Orders report, we have not seen a reaction in the markets. Traders are focused almost entirely on the Employment data.
Next week has very little in terms of economic data scheduled for release with just a single monthly report that we need to be concerned about and it comes late Monday morning (ISM services index). There are a couple of Treasury auctions set for midweek that are likely to impact rates during afternoon trading those days. Now that the FOMC meeting is behind us, so is the mandatory quiet period for Fed members, meaning we will see more individual member headlines in the coming weeks. There is a speaking engagement set for Wednesday morning that is worth watching. Look for details on next week's calendar in Sunday evening's weekly preview.
If I were considering financing/refinancing a home, I would....
Lock if my closing were taking place within 7 days... Lock if my closing were taking place between 8 and 20 days... Lock if my closing were taking place between 21 and 60 days... Float if my closing were taking place over 60 days from now...
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.*
*https://www.homeloanmortgageco.com/DailyRateLockAdvisory
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