September 1st, 2022 - Market Update
Current position: Floating Ahead of Tomorrow's Jobs Report
Stocks and Mortgage Bonds are both lower to start the day.
The southwestern Chinese city of Chengdu announced a lockdown of its 21.2 million residents. They are required to stay home with households allowed to send one person per day to shop for necessities.
This is the largest Chinese city to be locked down since Shanghai inApril and May. Other major cities including Shenzhen in the south andDalian in the northeast have also stepped up Covid restrictions this week, ranging from work-from-home requirements to the closure of entertainment businesses in some districts. This can reduce oil demand and consumption, which can cause inflation to move lower.
Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, decreased by 5,000 last week, and with the 6,000 lower revision to the prior week, claims are now at 232,000. Continuing Claims, which measures those who continue to receive benefits after their initial claims, increased 26,000 to 1.44M, the highest level since April.
After a consistent rise in the 4-week average in Claims since early April, we’ve seen a slight moderation in the past few weeks. Our good friend, Peter Boockvar, believes that the moderation could be due to many of the layoffs we have been hearing about being in the tech space, and that these very skilled workers are easily finding jobs and have not need to file for claims. With that being said, Claims were at 171,000 on April 1 and today sits at 242,000, so there still has been a meaningful rise.
The markets are expecting 300,000 job creations in the month of August and for the unemployment rate to remain at3.5%. But after yesterday’s weaker ADP report, it would lead us to believe that the BLS number may come in under expectations…although it’s unclear how well the ADP report will correlate to the BLS with their new methodology. On the other hand, theClaims data has been improving the past few weeks, which would point towards a stronger jobs picture.
It comes down to risk vs reward and what our strategy has been for the past week – We have been locking almost everyday, so most of our pipeline should be protected. And looking at the charts, the 10-year is right up against resistance at our target at 3.25%,which is holding for now.
MortgageBonds are trying to remain above support at the falling trend line at99. MBS are also in deep oversold territory, while the 10-year yield is in deep overbought territory…both signaling that a reversal may be due based on momentum. It should be noted that if the jobs report is strong, yields will likely gravitate towards 3.50% and MBS will move lower towards 98…so the Jobs report can have a big impact on the markets.
Because of our locking stance the past week, we can carefully float in to tomorrow’s Jobs Report.
Source: MBS Highway
Join our Watchlist
Our Watchlist is a free service we offer to ensure you never miss an opportunity to lower your interest rate. There is no obligation associated with joining.
We’ll track rates and market conditions on your behalf, and reach out when we see an opportunity to save you money.
Questions?
Reach out any time. We’re here to help you find the best mortgage program for your unique conditions.
Contact us:
847-634-2252
info@longgrovemortgage.com
Or start an application.
