February 2, 2023 – Economic News

• February 2, 2023
• realestate

MBS OVERVIEW

4:00 EST – Our benchmark FNMA MBS 6.00 February Coupon is down -21 BPS with 60 minutes left to trade.

Jobs, Jobs, Jobs: The January Challenger Job Cuts Report almost tripled from December, 102,943 vs. 43,651. Initial Weekly Jobless Claims were lower than expected, 183K vs. est. of 200K. The more closely watched 4 week moving average dropped to 191,750. Continuing Claims were 1.655M vs. est. of 1.677M

Rosie the Riveter: 4th QTR Non Farm Productivity was very good… rising at double the rate of the 3rd QTR (3% vs. 1.4%). Unit Labor Costs dropped from 2.0% in the 3rd QTR down to only 1.1% in the 4th QTR. December Factory Orders flipped from -1.9% in Nov to +1.8% in Dec but that was lower than est. of 2.3%.

Central Bank Palooza: The Bank of England increased their rate by 50BPS by a vote of 7-2. They also signaled that they may be done for awhile, depending on the future data. But while the ECB also raised by 50BPS, their message was much different as they said that they will raise another 50BPS at the next meeting as well.

On Deck for Tomorrow: Big Jobs Friday! Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings, Average Weekly Hours, U6 Underemployment Rate and ISM Non Manufacturing.

The 10 broke its support at 3.40% this morning, declining to 3.34% -8 bps, it didn’t hold with employment report in the morning. If Jan employment data doesn’t upset the apple cart in the morning look for the 10 to trade lower and decline to 3.30%. Mortgage prices this morning +13 bps but lost the gains as the 10 creeped back higher from morning lows.

Yesterday Jerome Powell and the FOMC remained stalwart on continuing to increase rates until inflation dies back to 2.0%. Powell’s remarks that, “disinflation process has started.” That four words dropped the 10 13 bps within 60 seconds. The ECB increased its rate by 50 bps as was expected. Mr. Powell isn’t done, next Tuesday he will speak at the NY Economics Club, expect more of the same, it’s the emphasis he puts on it that will get the focus.

Tech stocks rallied hard today, Meta Platform’ stock is bringing back flashes of Big Tech heydays. Meta increased 26% today pulling other hard beaten techs with it. The gain helped the company add about $260B in market value since its November low, cementing its place as the best-performing stock on the S&P 500 Index in the last three months. The stock is still about 50% below its 2021 peak. The tech rally the biggest since 2013.

The weekly claims this morning, the fourth time in the last five weeks. That bothers the Fed, the central bank wants to see unemployment to increase lowering wage inflation that continues to concern Jerome Powell and the FOMC. Continuing claims, which include people who have already received unemployment benefits for a week or more, fell to 1.66 million in the week ended Jan. 21. Demand for workers still far exceeds supply, which could put upward pressure on wages and broader prices. Both the weekly claims and continuing claims likely were distorted by floods, snowfall, and bomb cyclones.

Non-farm jobs expected up about 185K, private jobs +170K. Yesterday ADP’s job report was substantially lower than forecasts, up 106K against estimates of 158K. Like weekly claims whether may have played a part for the weakness. Hard to tell from here what traders are currently thinking. Watch average hourly earnings, expected +0.3% m/m and +4.4% year/year down from 4.6% in Dec. Two surveys combine to get employment labor market data, the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines, and the household survey which interviews 60,000 households and generates the unemployment rate.

Although the 10 broke 3.40% today, it will close at 3.40%. The employment report is noted for volatility, taking on risk can be a big payday or a momentary unrealized loss. Normally we go into employment risk off, that is what we will do now; MBS prices 19 bps lower than morning prices.