Thursday – October 3, 2024

UMBS opened down 15 bps.   S&P futures down 7.8 points

Bonds were already weaker overnight and saw a bit of extra selling at times following the Jobless Claims data.  The just-released ISM Services data is not helping.  The only component to lose ground was the ’employment’ index, but every other component pointed toward continued expansion and higher prices.

Jobless Claims = 225k vs 220k f’cast,   [219k prev]

S&P Services PMI = 55.2 vs 55.4 f’cast,   [55.7 prev]

ISM Services = 54.9 vs 51.7 f’cast,   [51.5 prev]

ISM Employment = 48.1 vs 50.2 prev

ISM Prices = 59.4 vs 56.3 f’cast, 57.3 prev

ISM Activity = 59.9 vs 53.3 prev

This is on top of yesterday’s,  ADP Employment = 143k vs 120k f’cast,    [103k prev]

This was higher than expected, and is a touch higher than expectations for Friday’s jobs report. Pay increases were 4.7% year-over-year.

Companies announced 72,821 job cuts in September, according to the Challenger, Gray and Christmas Job Cut Report. This is a 53% increase compared to a year ago. For the first 9 months of the year, companies announced 609,242 job cuts, which was up about 1% compared to last year.

There are some labor market reports that cause some concern about a weaker job market.  And while Jobless Claims is often thought to be a leading indicator, it is not one of those reports.  Today’s release is the latest example.  The 225k headline is a bit higher than the forecast of 220k, but still right in line with trends from the 3 most recent, “normal” years.

If the bond market has to digest an ISM Services report that is much stronger than expected, it would be best not to have it come out less than 24 hours before the big jobs report.  Otherwise, you get a day like today where the data fueled a pre-NFP (nonfarm payrolls–the headline component of Friday’s jobs report) lead off toward higher rates.

UMBS ended the day down 23 bps at 100.97

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