Markets edge lower as stocks struggle to recover from a sell-off

Dow slid back 30, decliners over advancers about 3-1 & NAZ fell 46.  The MLP index added 1+ to 300 & the REIT index held steady at 391.  Junk bond funds were weak & Treasuries also were little changed, keeping rates about even (more below).  Oil hardly budged in the low 74s & gold went up 14 to 2679.

Dow Jones Industrials

Companies in the private sector added 122K jobs in Dec, payroll processing firm ADP said.  The figure is below estimates of 140K jobs & lower than the prior month's reading of 146K.  "The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains," said Nela Richardson, ADP's chief economist.  "Health care stood out in the second half of the year, creating more jobs than any other sector."  The education & health services sector added 57K positions, leading job creation in Dec.  Construction added 27K jobs; leisure & hospitality added 22K jobs; other services contributed 13K & financial activities added 12K.  Hiring slowed in manufacturing (-11K), natural resources & mining (-6K), & professional & business services (-5K).  Large businesses, those with 500 or more employees, added 97K jobs in the month.  Businesses with 50 - 499 employees hired 9K workers.  Establishments with fewer than 50 employees added 5K jobs.  Wage growth in Dec slipped to 4.6% on an annual basis, the slowest pace of gains since Jul 2021.

Private sector adds 122,000 jobs in December, ADP says

Mortgage rates last week moved higher for the 4th week in a row.  That caused already very weak mortgage demand to drop even further.  Total mortgage application volume fell 3.7% compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  An additional adjustment was made for the New Year's holiday.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) increased to 6.99% from 6.97%, with points decreasing to 0.68 from 0.72 (including the origination fee) for loans with a 20% down payment, the highest rate since Jul 2024.  Applications to refinance a home loan rose 2% from the previous week but were 6% lower than the same week 1 year ago.  Rates are now 18 basis points higher than they were one year ago.  As for the weekly gain, volume in refinances is so low right now, that percentages are skewing larger than they normally would.  Applications for a mortgage to purchase a home fell 7% for the week & were 15% lower than the same week 1 year ago.  There is considerably more supply of homes for sale now than there was last Jan, but higher rates & higher home prices are clearly keeping buyers on the sidelines.  "Purchase applications declined for both conventional and government loans and dropped to the slowest weekly pace since February 2024," said Joel Kan, VP & deputy chief economist at the MBA.  "Refinance applications increased despite higher rates, but the increase was compared to recent low levels and was entirely driven by an increase in VA refinances, which continue to show weekly swings."  Mortgage rates moved higher to start this week, according to a separate survey from Mortgage News Daily (MND), which had the 30-year fixed average at 7.14% yesterday.  Economic data was the driving factor.  "ISM Services' inflation component was one of the worst offenders, but higher job openings didn't help.  The spike in yields was instantaneous but fairly well contained," noted Matthew Graham, COO at MND. 

Mortgage rates hit highest level since July, crushing application demand

The 10-year Treasury yield hovered near an 8-month high as investors digest this week’s strong economic data, which reinforced expectations that the Federal Reserve will act with caution in its rate cut path this year.  The yield on the benchmark 10-year Treasury climbed more than 2 basis points to 4.71%, reaching its highest level since late Apr, when it crossed the 4.739%.  The 2-year Treasury yield was about 1 basis point higher at 4.281%.  The 30-year Treasury yield, which was 3 basis points higher at 4.943%, hit its highest level since Nov. 2023.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors are looking to the minutes from the Federal Reserve's Dec meeting later today.  Minutes from the central bank's latest meeting, at which it cut its key interest rate by a qtr percentage point & surprised with the hawkishness of its closely watched “dot plot.”  Bond yields rose in the previous session, spurred by an increase in the Dec ISM services price index that reflected a higher-than-expected number of job openings for Nov.

10-year Treasury note yield hits highest level since April ahead of Fed minutes

Stocks slipped as investors absorbed a report that Pres-elect Donald Trump is considering declaring a national economic emergency to pave the way for proposed tariffs.  Meanwhile, the 10-year Treasury yield jumped as high as 4.72% to hold near an 8-month highs.  Trump is looking to the emergency powers to provide a legal basis for his proposed hefty & wide-ranging tariffs.  The news jolted markets already on guard for Trump economic surprises as Inauguration Day nears, bracing for a wave of policy moves & exec orders.