| Stock markets dropped in the first week of 2024 – After weeks of stock market gains and lower mortgage and bond yields, the year began with a reversal of those trends. This was because hiring picked up in December and wage gains, which have moderated in recent months, increased more than expected. On Thursday, ADP, the world’s largest payroll company, estimated that new jobs in December would be more robust than experts had hoped for. The December jobs report on Friday confirmed that. Lower unemployment and higher wages encourage consumer spending. The more consumers spend, the greater the risk of inflation picking back up. The Consumer Price Index (CPI) for December will be released next week. That will be the first measure of inflation to be released this year. The Dow Jones Industrial Average closed the week at 37,466.11, down 1.4% from 37,689.40 last week. The S&P 500 closed the week at 4,697.24, down 1.5% from 4,769.89 last week. The Nasdaq closed the week at 14,524.07, down 3.2% from 15,011.35 last week.
The December jobs report shows an increase in hiring; The Department of Labor and Statistics reported that 216,000 new full-time jobs were added in December, up from 173,000 in November and exceeding analysts’ expectations of 175,000 new jobs. The unemployment rate remained at 3.7% in December, unchanged from November. Analysts expected the unemployment rate to increase to 3.8%. The Fed is looking to get the unemployment rate to the low to mid 4% range to combat the labor shortage and get wage increases down in order to combat inflation. Average hourly wages increased 4.1% year-over-year, up from a year-over-year increase of 4% in November. Economists expected a 3.9% increase. U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 4.05%, up from 3.88% last week. The 30-year treasury bond yield ended the week at 4.21%, up from 4.03% last week. We watch bond yields because mortgage rates follow bond yields. Mortgage rates – Every Thursday Freddie Mac publishes mortgage interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of January 4, 2024, were as follows: The 30-year fixed mortgage rate was 6.62%, unchanged from 6.61% last week. The 15-year fixed was 5.89%, down from 5.93% last week. Rates rose on Thursday and Friday after news of the robust hiring in December. The 30-year jumped to near 7% on Friday. The graph below shows the trajectory of mortgage rates over the past year.
Freddie Mac was chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing. Their mandate is to provide liquidity, stability, and affordability to the U.S. housing market. Have a great weekend! |
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