Last Week in Review: Dark Clouds Helping Rates
Home loan rates reached their best levels in two months on the heels of not-so-good news. Let's get into what happened and look into the week ahead.
Bad News is Good News for Rates
The JOLTS (Job Openings and Labor Turnover Survey) report, a leading indicator on the health of the labor market, showed signs of cooling. It revealed 9.8 million jobs available, 700k less than expected and the first reading under 10 million in three years.
If you consider how the labor market works for example, first firms stop hiring, then they cut hours and then if conditions persist, they lay people off. So, this could be a sign to the Fed that the labor market is finally showing some signs of slowing down, which is what they want to help lower inflation.
The good news? While the number of jobs available came in well below expectations, we are still seeing 1.6 jobs available for every person unemployed, which is indicative of a tight labor market.
Dimon Jawboning
Earlier last week, JPMorgan Chase CEO Jamie Dimon, shared his annual thoughts with shareholders. He stated that the problems in the banking sector are far from over and the chance of recession is elevated. Over the last several months, Mr. Dimon did suggest the economy was headed into an economic hurricane and then backed off that gloomy stance and suggested we might not see a recession. Now he is firmly back in the recession camp and upon his headlines, rates improved and stocks didn't.
Manufacturing is Not Manufacturing
The ISM Manufacturing index, which is a reading of our national manufacturing production, came in at 47. Readings beneath 50 suggest contraction or shrinking of production. This is not a good number and because bonds and rates like numbers that are not good, they rallied.
3.26%
During the week, the 10-year Note yield hit 3.26%, the lowest since September. Most importantly, as of press time, the 10-year yield fell well below its 200-day Moving Average. History has shown that when the 10-year moves convincingly beneath its 200-day Moving Average, it leads to better rates in the weeks and months ahead.
Bottom line: With signs of a recession looming in the months ahead and if inflation continues to decline, it could push home borrowing costs lower and buoy the spring buying season.