Daily Rate Update: June 3rd-June 7th

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Friday – June 7, 2019

And the survey says: 75,000 jobs created in May, well below the 180,000 expected. Downward revisions to March and April erased 75,000 jobs from what was previously reported. Job growth is averaging 164,000 in 2019, down from 229,000 over the same period in 2018. The unemployment rate remained steady at 3.6%, the Labor Force Participation Rate unchanged at 62.8%.

Total unemployed or the U6 number fell to 7.1% from 7.7% in May 2018 and was the lowest reading since December 2000. Average hourly earnings rose 0.2% month-over-month versus the 0.3% expected while year-over-year wages grew at a 3.1% pace and have been edging lower. Overall, a disappointing report but the markets will wait for June’s data before a slowdown is declared.

One thing is for sure – a Fed rate cut to the benchmark Fed Funds Rate is coming. The soft Jobs Report increased the probability of a Fed rate cut in July to 78%. By year end, there is a 99% chance the Fed Funds Rate will be lower than current levels. What does it mean? Well – first off, Stocks love rate cuts and continue to rally this week on the notion the Fed will cut. If money flows aggressively into Stocks, it could be at the expense of Bonds.

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Thursday – June 6, 2019

Mortgage rates continued their descent this week due in part to the uncertainty surrounding the multiple-country trade issues along with low inflation levels. Freddie Mac reports that the 30-year fixed-rate mortgage fell to 3.82% this week from 3.99% with an average 0.5 in points and fees. It is the lowest rate seen since the fall of 2017. “These low rates are also good news for current homeowners. With rates dipping below four percent, there are over $2 trillion of outstanding conforming conventional mortgages eligible to be refinanced – meaning the majority of what was originated in 2018 is now eligible,” said Sam Khater, Freddie Mac’s chief economist.

Americans filing for first-time unemployment benefits continue to hover near lows seen in the late 1960s as the labor market continues to strengthen. Weekly initial jobless claims rose by 218,000 in the latest week, unchanged from the prior week. The four-week moving average of claims, which irons out seasonal abnormalities, fell 2,500 to 215,000. The report comes ahead of the closely watched Jobs Report for May which is due out Friday morning.

Gas prices at the pumps continued to edge lower this week due in part to rising gasoline and oil inventories along with fears of easing oil demand. Motor club AAA reports that the national average price for a regular gallon of gasoline fell to $2.78 today, down from $2.89 a month ago. A year ago the price was $3. “Gas prices have been trending lower now for the past month and there are no signs of pump prices changing gears toward more expensive for the summer season,” said Jeanette Casselano, AAA spokesperson.

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Wednesday – June 5, 2019

Mortgage rates continued to decline in the latest week due in part to the uncertainty surrounding trade talks between the US and China and the US and Mexico. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage fell by ten basis points to 4.23% with an average 0.33 in points in the week ended May 31. The MBA went on to report that total mortgage loan application volume rose 1.5%, the Refinance Index rose 6% while the Purchase Index decreased 2%.

In labor market news, ADP reports that private payrolls rose just by 27,000 in May, well below the 170,000 expected and down from the gain of 271,000 in April. The breakdown shows that small businesses lost 52,000 jobs, medium businesses gained 11,000 while large businesses saw an increase of 68,000. Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is moderating. Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting.”

Dovish monetary policy rhetoric from Fed Chair Powell yesterday boosted the chances of a Fed Funds Rate cut in 2019 while pushing US stocks to their best gains since January 4. The markets are now expecting the Federal Reserve to cut rates as many as three times this year and depends on how the economy evolves during 2019. The June Federal Open Market Committee meeting is showing a 33% chance of an interest rate cut, July 70% with September almost at a 90% chance of a cut. If Friday’s Jobs Report is weak, the probability of a hike will increase significantly.

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Tuesday – June 4, 2019

Ongoing trade tensions continue to drive the trading action in the financial markets. The Dow and S&P are higher, while the NASDAQ is lower as regulatory fears lower hit Alphabet (Google) and Amazon. Treasury prices are higher but well off their best levels while mortgage bonds are near unchanged. The multi-front trade war between the US and China and the US and Mexico has put incredible selling pressure on stocks in May. The Dow, S&P and NASDAQ all lost close to 6% last month, their first negative monthly performance in 2019.

The only economic report being released today was the ISM Manufacturing Index for May coming in near expectations. The rest of the week features the ADP Report on Wednesday and the government’s Jobs Report on Friday which includes non-farm payrolls, hourly earnings and the unemployment rate. There are no Treasury note or bond auctions this week. The Jobs Report is only one of a few reports that could move the markets in the current trade-war-dominated environment.

Mortgage rates remain at 16-month lows as the week begins while home price growth continues to slow, reports Black Knight. Black Knight reports that in March, which is typically a month that sees the largest home price gains of the year, home prices grew by just 1%, marking 13 consecutive months of home price deceleration. In addition, of the largest 100 US housing markets, 85 have seen price gains decrease over the past 12 months.

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Monday – June 3, 2019

Ongoing trade tensions continue to drive the trading action in the financial markets. The Dow and S&P are higher, while the NASDAQ is lower as regulatory fears lower hit Alphabet (Google) and Amazon. Treasury prices are higher but well off their best levels while mortgage bonds are near unchanged. The multi-front trade war between the US and China and the US and Mexico has put incredible selling pressure on stocks in May. The Dow, S&P and NASDAQ all lost close to 6% last month, their first negative monthly performance in 2019.

The only economic report being released today was the ISM Manufacturing Index for May coming in near expectations. The rest of the week features the ADP Report on Wednesday and the government’s Jobs Report on Friday which includes non-farm payrolls, hourly earnings and the unemployment rate. There are no Treasury note or bond auctions this week. The Jobs Report is only one of a few reports that could move the markets in the current trade-war-dominated environment.

Mortgage rates remain at 16-month lows as the week begins while home price growth continues to slow, reports Black Knight. Black Knight reports that in March, which is typically a month that sees the largest home price gains of the year, home prices grew by just 1%, marking 13 consecutive months of home price deceleration. In addition, of the largest 100 US housing markets, 85 have seen price gains decrease over the past 12 months.

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