Monday, November 17, 2014

Monday Market Watch







Monday Market Watch

The economic news this week contained few surprises. The major data, the US Retail Sales report and third quarter Eurozone Gross Domestic Product (GDP), came in very close to expectations. As a result, mortgage rates ended the week with little change.

One other US report released this week has been gaining in prominence since Fed Chair Yellen said that she watches it closely as a labor market indicator. This report, called JOLTS, measures job openings and labor turnover rates. The data showed that job openings in September remained near the 13-year high reached in August.

Another component of the report measures the rate at which employees voluntarily leave their jobs, and this "quit rate" rose from 1.8% to 2.0%, which was the highest level since April 2008. A higher quit rate is viewed as a sign of a stronger labor market, since employees generally are less likely to quit a job if they are not reasonably confident that they can get a new job. Taken together, the strong readings for job openings and quit rates point to continued improvement in the labor market.

The situation in Ukraine has faded from the headlines in recent weeks, but attention returned to the area this week. Officials from Ukraine claimed that Russia has been sending an increasing number of tanks and other military supplies into Ukraine, contributing to greater violence in the regions controlled by the rebels. Russian officials have continued to deny doing this. As outside observers seek to discover more information, this latest news has had little lasting influence on mortgage markets so far, but it serves as a reminder that geopolitical concerns could become a factor at any time. If the conflict in Ukraine escalates, it could cause investors to shift to safer assets, which would be favorable for bonds and interest rates. Conversely, an easing of tensions would have the opposite effect.

Next week, the most highly anticipated economic release will be the FOMC Minutes from the October 29 Fed meeting. These detailed Minutes provide additional insight into the debate between Fed officials. In addition, the Producer Price Index (PPI), which focuses on the increase in prices of "intermediate" goods used by companies to produce finished products, will come out on Tuesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for finished goods which are sold to consumers. The NAHB Housing index, Housing Starts, and Existing Home Sales also are on the schedule for next week.



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Monday, November 10, 2014

Monday Market Watch





   Market Recacp
 
The main story this week was the important monthly Employment report, which showed that wage inflation remains low. The European Central Bank (ECB) made no change in policy and had little impact on US markets. After a quiet four days, Friday's Employment data caused mortgage rates to improve and end the week a little lower.

Against a consensus forecast of 235K, the economy added 214K jobs in October. Revisions to prior months added 31K jobs. The economy has added an average of about 220K jobs per month so far this year, which is the fastest pace in over ten years. The Unemployment Rate declined to 5.8%, the lowest level since July 2008. Average Hourly Earnings, an indication of wage increases, were just 2.0% higher than one year ago. Bottom line, the job gains were roughly in line with expectations, but the low level of wage inflation was favorable for mortgage rates.

The results of this week's elections were largely as expected with the Republicans gaining control of the Senate and adding to their majority in the House. There was little immediate market reaction. So, will a Congress lead by the GOP mean that changes are coming for the mortgage market? The general belief is that there will be no significant changes any time soon, and probably not before the next Presidential election. The continuing conservatorship of Fannie Mae and Freddie Mac is the biggest industry issue Congress needs to address, but the complexity of any substantive reform and the significance of Fannie and Freddie to the housing market make this a very difficult issue.

Next week will be a light one for economic events. The JOLTS report, measuring job openings and labor turnover rates, will come out on Thursday. Retail Sales, which account for roughly 70% of economic activity, will be released on Friday. There will be Treasury auctions on Monday, Wednesday, and Thursday. Mortgage markets will 

be closed on Tuesday in observance of Veterans Day.






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