Dow went up 82, decliners over advancers better than 3-2 & NAZ gained 46. The MLP index was steady in the 239s & the REIT index fell 2+ to the 338s while yields rose. Junk bond funds slid lower & Treasuries were heavily sold, raising yields substantially (more below). Oil was even in the 82s following its recent decline & gold rebounded 6 to 1838.
AMJ (Alerian MLP Index tracking fund)
US job growth unexpectedly accelerated in Sep, evidence the labor market remains resilient even as it confronts high interest rates & stubborn inflation. Employers added 336K jobs in Sep, the Labor Dept said in its monthly payroll report, almost double the 170K jobs forecast. It marked the best month for job creation since Jan. The unemployment rate, meanwhile, held steady at 3.8%. The report also contained steep upward revisions to job growth earlier this summer. Gains for Jul & Aug were revised up by a total of 119K jobs to a respective 236K & 227K, the gov said, suggesting that the labor market is hotter than it previously appeared. All of this may be of concern to the Federal Reserve, which has signaled it is closely watching the report for evidence the labor market is finally softening after more than a year of interest rate hikes. The surge in hiring, which threatens to keep inflation elevated. could provide the central bank fodder to approve another interest rate hike this year & hold rates at peak levels longer than previously expected. The odds of a Nov rate hike jumped to 30% today after the latest jobs data, up from 18% a week ago, according to the CME Group's FedWatch Tool, which tracks trading. Investors also raised their expectations of a Dec rate increase, with 45.2% of traders predicting another hike. Average hourly earnings, a key measure of inflation, increased 0.2% for the month & remain up 4.2% from the same time one year ago. Both figures came in under estimates, a welcome sign for the Fed.
September jobs growth tops expectations as unemployment rate ticks up
Mortgage rates rose again this week, continuing their upward march & contributing further to plummeting demand in the housing market as more would-be buyers retreat. Freddie Mac's latest Primary Mortgage Market Survey shows the average rate for the benchmark 30-year fixed-rate mortgage jumped to 7.49%, up from 7.31% last week & from 6.66% a year ago. The rate for a 15-year mortgage also climbed, averaging 6.78% after coming in last week at 6.72%. One year ago, the rate on a 15-year fixed note averaged 5.9%. "Mortgage rates maintained their upward trajectory as the 10-year Treasury yield, a key benchmark, climbed," Freddie Mac chief economist Sam Khater said. "Several factors, including shifts in inflation, the job market and uncertainty around the Federal Reserve’s next move, are contributing to the highest mortgage rates in a generation. Unsurprisingly, this is pulling back homebuyer demand." The Mortgage Bankers Association reported Wed home-purchase applications tumbled 6% to a nearly 3-decade low last week. The data shows application volume is down 22% compared with the same time last year. Housing affordability in the US reached an all-time low this summer & continues to get worse. Typically, in a market where interest rates rise as fast they have under the Fed's aggressive rate-hike campaign, home prices would be expected to pull back. But prices remain high due to a lack of homes for sale as more homeowners who are locked in at lower interest rates stay put rather than sell. Realtor.com's Sep housing report released this week shows home prices rose for the 2nd month in a row on an annual basis, while the number of homes on the market fell for the 3rd consecutive month. However, there was a month-over-month increase in listing price reductions.
Mortgage rates jump again as high home prices, low inventory persist
Treasury yields rose, with the 10-year nearing a 16-year high after the latest jobs data came in stronger than economists anticipated. The yield on the 10-year Treasury was up by 9 basis points at 4.809%. It had hit a fresh 16-year high earlier in the week, rising as high as 4.884%. The yield on the 2-year Treasury was last trading at 5.079% after rising by 5 basis points. Yields & prices have an inverted relationship & 1 basis point is equivalent to 0.01%. Wages grew modestly less than forecasted. Average hourly earnings rose 0.2% on the month & 4.2% on an annualized basis, while economists expected gains of 0.3% month over month & 4.3% year over year. Additionally, Aug & Jul nonfarm payrolls were revised upward by a combined 119K jobs, far more than previously reported. This report comes as central bank policymakers assess where Federal Reserve rates will go from here. There have been mixed messages from policymakers about whether rates will need to go higher still to ease the economy, including the labor market, & cool inflation. However, Fed officials appear to widely expect rates to stay higher for longer.
U.S. 10-year yield jumps back near 16-year high after better-than-expected jobs report
In early trading, Dow was in the red. Then buyers returned, taking it into the black. On the one hand, stronger job growth is good. But it also tells the Fed it has more work to do on reducing inflation. Traders will have a lot to think about over the weekend, evaluating the effects of strong job growth. And the Dow chart below is not pretty.Dow Jones Industrials
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