Friday – February 5, 2021
January Non-Farm Payrolls rose by just 49K while December was revised lower to -227,000 from -140,000. The BLS reports that in ‘January, notable job gains in professional and business services and in both public and private education were offset by losses in leisure and hospitality, in retail trade, in health care, and in transportation and warehousing.’ The Unemployment Rate fell to 6.3% from 6.7% while Hourly Earnings rose 0.2% versus the gain of 0.2% expected. The Labor Force Participation Rate was little changed at 61.4% while total unemployed or the U6 number, fell to 11.1 from 11.7 in December. So within the headline numbers there were some silver linings.
In the current environment, the U.S. financial markets have several factors that are impacting trading. Stimulus, vaccinations, significantly increased bond issuance, inflation fears, solid earnings and an improving global economy are all stock market positive. On the stimulus front, the $1.9T stimulus relief plan has passed through the Senate and now goes back to the House for a vote where it looks like it may also get passed. The closely watched S&P 500 stock index hit a record high today. Further stimulus will fuel the need for the U.S. Treasury to ramp up bill, note and bond offerings which will weigh on the bond markets.
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Thursday – February 4, 2021
Home borrowing costs were unchanged this week and remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage held steady at 2.73% with 0.7 in points and fees. A year ago at this time, the rate averaged 3.45%. Sam Khater, Freddie Mac’s Chief Economist. “This rate environment is advantageous for those who are looking to refinance in order to strengthen their financial position.
Americans filing for first-time unemployment benefits fell in the latest week to 779,000 from 812,000. Continuing claims, or those receiving benefits for at least two weeks straight, fell to 4,592,000 from 4,785,000. Several of the states that were under lockdown measures have slowly begun to open up. When the economy fully reopens many workers should be able to go back to work.
It looks like the near $2 trillion stimulus relief plan from President Biden’s administration will get pushed through Congress with a budget reconciliation clause. The relief plan would send $1,400 checks to those eligible Americans along with aid for states, extended enhanced unemployment benefits, rental assistance and eviction moratorium, assistance for small businesses, vaccination and school aid. If this $1.9 trillion plan is passed, it would mean the U.S. government will have spent $5 trillion over the past 10 months to fight the effects of the pandemic.
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Wednesday – February 3, 2021
Mortgage rates remained at record lows in the latest survey and inched lower last week. The MBA reports that the 30-year fixed-rate mortgage fell three basis points to 2.92% with 0.32 in points for the week ended January 29, 2021. The Market Composite Index, a measure of total mortgage loan application volume, jumped 8.1%, the Purchase Index was unchanged, while the Refinance Index surged 11.1%. Spokesperson Joel Kan said, “Average purchase loan amounts in early 2021 continue to rise across all loan types, driven by a strong pace of home sales, tight housing inventory and high home-price growth.”
The service sector makes up a large portion of the U.S. economy and has seen growth for the eighth month in a row in January. The ISM Service Index rose to 58.7 in January to the highest level since February 2019 (58.8). Within the report it showed that the employment component increased. The report went on to say that respondents’ comments are more optimistic about business conditions and the economy.
Private payroll growth rose in January in the first of two key labor market reports released today. ADP Private Payrolls rose by 174,000 in January versus the 40,000 expected. December was revised to -78,000 from -123,000. Small businesses saw a gain of 51,000, medium size gained 84,000 while large businesses rose by 39,000. “The labor market continues its slow recovery amid COVID-19 headwinds,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. The government’s Jobs Report will be released on Friday morning.
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Tuesday – February 2, 2021
CoreLogic reports that home prices, including distressed sales, jumped 9.2% from December 2019 to December 2020, up 1% monthly from November 2020 to December 2020. Low inventories and a push for more space along with millennial demand fueled the surge in prices. CoreLogic said the ‘consequences of the pandemic were seen in the dwindling supply of homes — dropping, on average, 24% below 2019 levels — as homeowners delayed selling.’
Positive earnings coupled with an ease in the volatile GameStop trade are boosting stocks this morning at the expense of the bond markets today. Exxon Mobile and UPS reported solid earnings while Amazon and Google’s numbers are expected to be strong when the numbers are reported after the close today. Also, talk of new stimulus is fueling the stock market rally. After last week’s GameStop filled short-squeeze volatility, short-interest has declined. On to the next one? We’ll see.
Prices at the gas pumps continue to increase as the price of oil creeps higher. The national average price for a regular gallon of gasoline is at $2.42, up from $2.25 a month ago and just a nickel below what the price was last year this time. AAA says that typically, as we have seen lately, factors such as a decrease in demand and an increase in supply drive a decline at the pump, but sustained crude oil prices are pushing the increase. Gas prices are expected to continue to increase as crude oil prices remain at current levels of $52 to $55 a barrel.
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Monday – February 1, 2021
Two key labor market reports will be delivered this week for January and coming after the weak reading in December which was due in part to a rise in virus cases. The ADP Private Payrolls report will be released on Wednesday and the government’s Jobs Report on Friday. The hospitality sector took a huge hit in December losing nearly 500,000 jobs during the month due to shutdowns from the virus. Non-Farm Payrolls are expected to increase by 50,000 in January.
The U.S. economy is expected to grow in 2021 after the pandemic wreaked havoc on the jobs sector and the economy in 2021. The Atlanta Fed is forecasting economic growth or Gross Domestic Product (GDP) to increase by 5.2% this year while the Congressional Budget Office (CBO) expects an increase of 4.6%. The CBO went on to forecast that the unemployment will slip to 5.7% in 2021.
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