Jobs Grow, Unemployment Flat, Fed Acts in a Busy Week
Election results have little effect on markets; Unemployment claims up to 457,000; Fed announces plan to purchase $600 billion in securities; Employers add 151,000 jobs, unemployment rate level at 9.6%
Last week brought more market-affecting news than any in recent weeks. On top of a long-anticipated meeting of the Federal Reserve Open Markets Committee, the week also contained any month’s most significant economic report, the Employment Situation, or Non-Farms Payrolls report. Let’s take a look at the effect these reports have had on mortgage rates.
Monday started the week off weaker for mortgage rates as the ISM services index showed manufacturing was stronger than expected. This sparked a wave of selling in mortgage and other fixed-income securities. Construction spending also exceeded expectations. These reports were partially offset by a weaker result in personal income and expenditures, which indicated consumers simply had less money available to spend in October.
Tuesday was the quietest day of the week, although mortgage rates fell slightly on no news.
Wednesday was a doozy. Markets opened to a better-than-expected ADP private employment report that showed 43,000 jobs had been added by private employers in October, and suggesting that Friday’s Employment Situation report could exceed estimates, too. Markets also had to absorb the effects of the Republican victory in the House of Representatives, which is believed to be likely to induce gridlock in Washington. This should provide some stability to financial regulations, which have been somewhat volatile of late. Then, at 2:15, the Fed dropped its bombshell: $600 billion in additional security purchases over the next 9 months.
Mortgage rates had opened better on Wednesday, as the election results weighed more heavily than the other data, most of which would normally cause an increase in rates. Substantial volatility came into play at 2:15 PM when the FOMC announced its decision. Initially, this caused a sharp increase in rates, however, most of that unwound later in the afternoon, and rates closed slightly better than they had opened.
Thursday was a quieter day, as traders digested the Fed announcement, along with Thursday’s higher-than-expected jobless claims. The net result was mortgage rates declined further. Mortgage aggregator Freddie Mac revealed the results of its mortgage rate survey, showing the 30-year fixed rate at an average of 4.24% with 0.8 points, very near record lows.
Friday was another huge day for mortgage rates. The jobs report showed a total of 151,000 jobs added in October, compared to expectations around 73,000. Further, private employers added 159,000 jobs, which is exactly what economists and the Fed have sought as a sign that the right part of the economy is working to relieve unemployment. While an additional 90,000 jobs were added through revisions to prior results, the unemployment rate remained unchanged at 9.6%.
Fixed-income markets sold off on Friday in reaction to this, as the jobs report was seen as a sign that the economy might be on the right track again. At the end of the day, mortgage rates for most situations had increased by about .125%. In spite of this, for the week, mortgage rates improved.
This week, data is substantially more sparse than last. Apart from Wednesday’s initial jobless claims (moved up from Thursday due to the holiday), and Friday’s consumer sentiment, there are few market-influential reports coming. This week’s Treasury auctions will be a strong indicator of the way ahead for rates, though, as how readily that supply of new securities is absorbed will reflect on the strength of the market. Here’s a full list of what to expect:
Monday:
- 3-year note auction
Tuesday:
- Retail sales
- 10-year note auction
Wednesday:
- Weekly unemployment claims – note moved from Thursday due to holiday
- 30-year bond auction
- Treasury budget
Thursday:
- Markets closed for Veterans’ Day
Friday:
- Consumer sentiment
Clearly this week will be busier than last week was. If the Treasury auctions are well-received, mortgage pricing should remain stable, however, weaker Treasury results could spell doom for the current low-rate environment. It is beginning to be a bit reckless to float all loans in process; loans less than 30 days to closing should be locked wherever realistic. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great week!
Related articles:
Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
November 8, 2010 by Dan Hartman · Leave a Comment
Dan Hartman is a founding Senior Mortgage Advisor with Province Mortgage Associates, a Rhode Island Mortgage Lender, and a Massachusetts, Connecticut and New Hampshire Mortgage Broker. Dan has worked in the mortgage industry for more than 10 years, and holds an MBA in Finance from Clark University. Every day, Dan helps homeowners and home buyers in southern New England with their mortgage and refinance questions. He also serves as an Adjunct Professor at Roger Williams University and the University of New Haven. NMLS #13507.