Dow fell 219, decliners were modestly ahead of advancers & NAZ went up 43. The MLP index added 1+ to the 282s & the REIT index slid back 1+ to the 427s. Junk bond funds hardly budged & Treasuries were higher which reduced yields. Oil was flattish in the low 69s & gold advanced 20 to 2546 (more on both below).
Dow Jones Industrials
Long-term mortgage rates remained unmoved this week while shorter notes fell some, but did little to spur on demand. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage held steady at 6.35% & the average rate on a 30-year loan was 7.12% a year ago. "Mortgage rates remained flat this week as markets await the release of the highly anticipated August jobs report," said Sam Khater, Freddie Mac's chief economist. "Even though rates have come down over the summer, home sales have been lackluster." Khater noted there has been an uptick in activity for refinancing. Many would-be buyers & sellers are holding out to see if rates fall further. Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey. The average rate on the 15-year fixed mortgage declined to 5.47% from 5.51% last week. One year ago, the rate on the 15-year fixed note averaged 6.52%.
Mortgage rates in limbo as home sales remain 'lackluster'
Layoffs soared in Aug, hitting their highest total for the month in 15 years, while YTD hiring reached a historic low, outplacement firm Challenger, Gray & Christmas reported. Announced job cuts totaled 76K for the month, lurching 193% higher than Jul. Though the total was just 1% higher than the same month in 2023, it was the highest number for Aug going back to 2009, as the economy was still escaping the worst of the global financial crisis. On the hiring front, companies said they were adding just 6101 new workers, up by nearly 2500 since Jul, but down more than 21% from Aug 2023. The YTD hiring announcements of nearly 80K is the lowest total in history going back to 2005. “August’s surge in job cuts reflects growing economic uncertainty and shifting market dynamics,” said Andrew Challenger, the firm’s senior VP. “Companies are facing a variety of pressures, from rising operational costs to concerns about a potential economic slowdown, leading them to make tough decisions about workforce management.” The report comes with concerns rising that the labor market is weakening even though the US economy has seen growth of 1.4M in nonfarm payrolls this year. Payrolls processing firm ADP reported yesterday that private companies added just 99K workers in Aug, the smallest gain since Jan 2021. Markets expect a softening jobs picture to prod the Federal Reserve into lowering interest rates later this month even with inflation running higher than the central bank's 2% target. The Challenger layoffs data is somewhat out of sync with gov reports, which show that initial claims for unemployment benefits have been slightly elevated in recent weeks but not reflective of a major escalation. For last week, jobless claims totaled 227K, a slight decrease from the previous period. Today's report showed the biggest growth in planned layoffs came in the technology field, with companies announcing 42K cuts, the most in 20 months. “The labor market overall is softening,” Challenger said. Companies announcing job cuts most often cited cost-cutting & economic conditions as the reasons, though artificial intelligence also was listed for the first time since Apr.
Layoffs jump in August while hiring in 2024 is at a historic low, Challenger report shows
The number of Americans filing for unemployment benefits fell to its lowest level in 2 months last week, signaling that layoffs remain relatively low despite other signs of labor market cooling. Jobless claims fell by 5K to 227K for last week, the Labor Dept reported. That's the fewest since the week of Jul 6, when 223K Americans filed claims. It's also less than the 230K new filings that were expected. The 4-week average of claims, which evens out some of the week-to-week volatility, fell by 1750 to 230K, the lowest 4-week average since early Jun. Weekly filings for unemployment benefits, considered a proxy for layoffs, remain low by historic standards, though they are up from earlier this year. During the first 4 months of 2024, claims averaged a historically low 213K a week. But they started rising in May. They hit 250K in late Jul, adding to evidence that high interest rates were finally cooling a red-hot US job market.
Applications for US jobless benefits fall to 2-month low as layoffs remain at healthy levels
Gold prices rose to near 1-week highs, on the back of a weaker $ & lower yields after signs of labor market losing steam led investors to expect a super-sized rate cut from the Federal Reserve this month. Spot gold was up 0.9% at $2515 per ounce, rising as much as 1.1% earlier in the session. Prices slightly pared gains after the US services sector data. US gold futures settled 0.7% higher at $2543. US private employers hired the fewest number of workers in 3½-years in Aug, potentially hinting at a sharp labor market slowdown. This follows data yesterday showing a sharp decline in US job openings in Jul. Traders currently see a 59% chance of a 25-basis-point (bp) reduction by the central bank this month & a 41% chance of a 50-bp cut, according to the CME FedWatch tool. Attention turns to the upcoming non-farm payrolls report tomorrow.
Gold Gains as Investors Anticipate Super-Sized Fed Rate Cut
WTI crude futures settled at $69.10 per barrel, remaining near a 14-month low, as concerns over slowing demand in the US & China, combined with the potential for increased oil supply from Libya, outweighed a larger-than-expected drop in US crude inventories. The Energy Information Administration reported a 6.9M barrel reduction in stockpiles for last week ending, well above forecasts. At the same time, OPEC+ delayed planned production hikes for Oct & Nov, which could tighten 4th-qtr supply by 100-200K barrels per day. In Libya, despite political tensions, tankers began loading crude again. Meanwhile, positive US economic data calmed fears over the Federal Reserve's potential interest rate cuts, with many anticipating a reduction at its Sep meeting. Lower rates could help spur economic growth & boost oil demand.
Oil Settles Near 14-Month Low
Jobs market data serves as an appetizer for tomorrow's jobs report for Aug, crucial to the Fed's policy decision making & will be closely watched. While recent soft readings make the case for deeper rate cuts, they could also be a sign the US is on the brink of recession & suggest a "soft landing" is no longer in the cards.
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