Economic news this week was quite favorable. On Tuesday, Treasury Secretary Janet Yellen announced that the U.S. would need to sell about $75 billion less than expected in bonds to fund the government debt. She also commented that the Treasury Department would issue mostly short-term bonds rather than long term bonds, signaling that the department expected long-term yields to drop, and the government did not want to be obligated to today’s rates for a long term. On Wednesday the Fed left their key interest rates unchanged for a second straight month. Fed Chairman Powell’s comments were more optimistic about the future of inflationary pressures than they have been. On Thursday ADP, the largest payroll servicer in the world, forecasted that the jobs market slowed in October. Friday, the Bureau of Labor and Statictics released the official report. It showed that the number of new jobs created was ½ of the number of new jobs created in September and that the unemployment rate was rising, and wage growth was slowing. Additionally, there was a report that showed rental rates had dropped, manufacturing had slowed, unit labor costs had dropped, jobless claims increased, and the EU reported that their economy had slowed, and their inflation rate had dropped significantly. Investors looking for signs that the economy was finally slowing finally got data to support that it is. Both bond yields and mortgage rates dropped significantly which led to the best one-week stock market rally this year. Mortgage rates hit a 23-year high in October when the 30-year mortgage rate hit 8.25%. Recent data has reversed that trend. On Friday, the 30-year mortgage rate was 7.5%. Treasury bond yields also dropped sharply this week. The 10-year treasury bond yield topped 5% just 10 days ago but closed the week at 4.57%.
Job growth cooled in October – The Department of Labor and Statistics reported that 150,000 new full-time jobs were added in October. That was about ½ of the revised 297,000 created in September. The unemployment rate increased to 3.9% in October, up from 3.8% in September. Average hourly wages increased 4.1% year-over-year, the smallest year-over-year increase in over a year.
Stock markets surged in their best week of the year – The Dow Jones Industrial Average closed the week at 34,061.32, up 5.1% from 32,417.59 last week. It is up 2.8% year-to-date. The S&P 500 closed the week at 4,338.34, up 5.4% from 4,117.37 last week. It is up 13% year-to-date. The Nasdaq closed the week at 13,478.28, up 6.7% from 12,634.01 last week. It is up 28.8% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 4.57%, down from 4.84% last week. The 30-year treasury bond yield ended the week at 4.77%, down from 5.03% last week. We watch bond yields because mortgage rates follow bond yields.
Mortgage rates – The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of November 2, 2023, were as follows: The 30-year fixed mortgage rate was 7.76%, up from 7.79% last week. The 15-year fixed was 7.03%, up from 7.03% last week. Rates dropped all week. Next week’s rates should be closer to 7.5% on a 30-year fixed if the mortgage market remains where it was on Friday.
Have a great weekend!