Dow rebounded 136, advancers over decliners about 4-1 & NAZ gained 100. The MLP index advanced 2+ to the 247s & the REIT index climbed 2+ to the 391s on lower interest rates. Junk bond funds inched higher & Treasuries had a little buying which lowered yields (more below). Oil was up 1+ to the 73s & gold rose 16 to 2066.
AMJ (Alerian MLP Index tracking fund)
The labor market ended 2023 on solid footing as job growth continued to chug along at a healthy pace in Dec. Employers added 216K jobs in Dec, the Labor Dept said, topping the 170K gain forecast & the unemployment rate held steady at 3.7%. The report also contained sizable downward revisions to job growth during the previous 2 months. Gains for Oct & Nov were revised down by a total of 71K jobs to a respective 105K & 173K, the gov said, suggesting that the labor market is weaker than it previously appeared. In total, the economy added about 2.7M jobs over the course of 2023, down from 4.8M in 2022. In another show of strength for the economy, average hourly earnings, a key measure of inflation, increased 0.4% for the month & remained up 4.1% from the same time one year ago. Both of those figures came in slightly ahead of expectations. The Federal Reserve has signaled that it is closely watching the report for evidence that the labor market is finally cooling after nearly 2 years of interest rate hikes. Policymakers voted last month to leave their benchmark rate unchanged for a 3rd straight time & hinted they could soon begin cutting rates amid signs the economy is gradually slowing. Job gains were mostly concentrated in a handful of sectors last month, with the biggest gains in the gov (52K), leisure & hospitality (40K) & health care (38K). Hiring in construction also trended upward. Those gains helped to offset job losses in transportation & warehousing, the result of a steep drop in the number of couriers & messengers. The labor market has remained historically tight over the past year, defying expectations for a slowdown. But there are some signs that cracks are beginning to appear after last year's blistering pace of growth.
US economy adds 216,000 jobs in December, beating expectations
Mortgage rates' steady downward trend hit a pause this week while demand fell, as data indicates would-be buyers are waiting on the sidelines until they see rates return to the levels of yesteryear. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate for the benchmark 30-year fixed mortgage nudged up to 6.62% this week, a slight increase from 6.61% last week & the popular note averaged 6.48% a year ago. At the same time, the rate on the 15-year fixed mortgage edged lower, averaging 5.89% after coming in last week at 5.93%. One year ago, the rate on the 15-year fixed note averaged 5.73%. "Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point. However, since then rates have moved sideways as the market digests incoming economic data," said Sam Khater, Freddie Mac's chief economist. "Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds," Khater continued. "While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise." At the same time, the rate on the 15-year fixed mortgage edged lower, averaging 5.89% after coming in last week at 5.93%. One year ago, the rate on the 15-year fixed note averaged 5.73%. "Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point. However, since then rates have moved sideways as the market digests incoming economic data," said Sam Khater, Freddie Mac's chief economist. "Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds," Khater continued. "While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise." The Mortgage Bankers Association's (MBA) index of mortgage applications fell 9.4% last week, compared with 2 weeks earlier. Applications for a mortgage to purchase a home dropped 5% from 2 weeks earlier, while volume is down 12% compared with the same time last year. Demand for refinancing also fell last week, declining 18% from the previous 2 weeks. Compared with the same time last year, refinance applications are up about 15%. Recent data released by a Realtor.com survey indicates many potential buyers & sellers alike are waiting for rates to show steeper declines before making a move. A Realtor.com survey found 12% of prospective buyers say rates would need to drop below 6% to bring them into the market, while 28% say rates need to fall below 4% before they would make an offer on a home.
Mortgages rates tick higher for first time in 9 weeks
Treasury yields retreated as traders weighed the US economic outlook following the latest nonfarm payrolls data release. The yield on the 10-year Treasury was down 1 basis point at 3.978% after briefly topping 4% & the 2-year Treasury yield was last down 4 basis points at 4.345%. Yields & prices move in opposite directions & one basis point equals 0.01%. A hot labor market could keep the Fed from cutting interest rates as early as the market had come to expect. Some analysts had recently expected a cut as soon as Mar, but the Fed has not provided a timeline. Others speculate that rate cuts could happen later than expected, backed by minutes released this week from the central bank's Dec policy meeting suggesting a degree of uncertainty.
10-year Treasury yield falls back below 4% despite strong jobs report
After the market decline this week, buyers are nibbling today. The rally does not appear to be strong with all the uncertainty about unknowns on rate cuts. Once again, nervous investors are buying gold which keeps it near record levels.Dow Jones Industrials
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