August 2nd, 2024 2:33 PM by T. Fanning
Happy Friday!
Private job growth has slowed, and wages are at their lowest point in three years, according to ADP's Wednesday report. Companies added just 122,000 jobs, the slowest growth since January. This trend points to a potential rate cut in September. Meanwhile, mortgage rates decreased significantly (as much as .50%), providing relief for both prospective homeowners and current mortgage holders.
Next week presents limited economic data that might affect mortgage rates. Key highlights include the ISM Services Index report (an index based on surveys of more than 300 manufacturing firms) on Monday morning and midweek Treasury auctions. With the pre-Fed meeting quiet period concluded, individual Fed members are expected to start making public statements.
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Last Updated: 8/2/24
Friday's bond market has opened up sharply after this morning's major economic report gave us results that were extremely bond friendly. Stocks are tanking with the Dow and Nasdaq both down over 500 points. The bond market is currently up 39/32 (3.82%), which should improve this morning's mortgage rates by approximately .500 - .750 of a discount point if compared to Thursday's early pricing.
Today's big news was the release of July's Employment report at 8:30 AM ET. It showed that only 114,000 new jobs were added to the economy last month and that the U.S. unemployment rate rose 0.2% to 4.3%, which is its highest rate since October 2021. Analysts were expecting to see 175,000 new payrolls and a 4.1% unemployment rate. There was also a downward revision to June's payroll number of 27,000, meaning job growth wasn't as strong as thought that month either.
If the first two headline numbers weren't good enough, the average earnings reading can be the icing on the cake for bond traders and mortgage shoppers. The 0.2% rise in earnings fell short of the 0.3% that was predicted. July's softer reading also lowered the annual rate by 0.2%, easing wage inflation concerns. Bonds tend to be extremely sensitive to inflation-related data and signs of weaker inflation make long-term mortgage bonds more attractive to investors.
June's Factory Orders data was released late this morning, revealing a 3.3% decline in new orders for durable and non-durable goods. This was much weaker than expected and is another sign of manufacturing sector weakness, allowing us to label it good news for rates also. However, it is the Employment report results that are fueling this morning's bond rally, not this report.
This morning's data all but guarantees a September rate cut from the Fed. With the labor market appearing to slow, the Fed really doesn't have much of a reason not to make a move. Today's report has shifted the discussion from if a move will come at their September FOMC meeting to how big of a cut they will make. Some analysts are now calling for a half point reduction to key short-term rates instead of a quart point. The Fed has traditionally avoided monetary policy moves around a presidential election day, so unless there is strong need for one in November, September and December's meetings are likely to be the time they will act.
Next week is very light in terms of scheduled economic releases that may influence mortgage rates. There appears to be only one monthly report that we need to be concerned about and it will be posted Monday morning (ISM services index). There are also a couple of Treasury auctions midweek that could affect rates during afternoon hours. Also worth noting is the fact the Fed's required pre-FOMC meeting quiet period is no longer applicable, so we will be hearing from individual Fed members in the coming weeks. Some of those speeches start next week. Look for details on all of next week's activities 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... Float if my closing were taking place between 8 and 20 days... Float 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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