Happy Friday A.M.,
Is this really February? January was a blur.
The bond rally continued yesterday mortgage bonds improved 20bps and the 10-year yield closed January around 2.63%. The Dow may have closed down 15 points down on the day, however for the month rose 7.17%. This was the largest one-month increase for the Dow since 2015 and largest January gain since 1989. Pretty remarkable that equities improved and bonds improved substantially in that same month. There is no formal correlation between stocks and bonds and typically when we see pockets of correlation, it tends to be is inverted. I would not expect the January trend to continue. This morning the 10-year yield has climbed back to 2.68% and MBS have worsened by 23 bps, giving back all of yesterday’s gains. A strong Labor Department jobs report showing 304,000 new jobs last month is the likely catalyst for today’s move. This was the largest gain since February 2018 and far exceeded forecast of 165,000 new job expected. Government workers furloughed during the shutdown were included in wage calculations since they are guaranteed back pay. However, the furloughed workers were classified as temporary layoff and drove the unemployment rate up to 4.0% versus the previous month of 3.9%. Wages increased modestly (.1%)and below expectations (.3%) which is buoying any additional selling so far.
No real news on trade or Brexit to share.
Some surprisingly positive news from the New Home Sector. Yesterday the Commerce Department released new-home sales data for November (yes, I agree, why are we looking at November when we are now in February) showing another strong economic indicator. The seasonally adjusted new home sales were 657,000, well exceeded forecasts of 560,000. The new sales numbers were 17% higher than October and was an 8-month high. The report was previously delayed during the government shutdown. November sales were 7.7% lower year-over-year.
According to a new analysis by Realtor.com, today’s 18-year-old will need to save $304 every month for the next 12 years in order to accumulate the 10 percent down payment, plus closing costs, needed to buy a median-priced home. Yuck, that’s not so promising…
Enjoy the weekend and the game, and first, make today great!