WHAT THE HECK HAPPENED???
After we enjoyed the fireworks from the 4th of July, the labor sector reports added some sparks to the markets. AND we had the Fed minutes from their last meeting about what might be in store for rate hikes.
The major damage, which saw rates surge back into the 7% range was the ADP Private Payroll and Employment Report. 497,000 JOBS WERE CREATED, and annual pay rose 6.4%. This was led by hospitality and construction jobs created.
Friday’s Bureau of Labor Statistics poured a little water on the raging inferno with numbers that were not as rosy and showed a small decline in income. That coupled with initial jobless claims, continuing claims, and the JOLTS (Job Openings and Labor Turnover) which showed a sizable drop, suggested softer job growth.
The minutes from the June meeting showed that the Fed is planning additional hikes and some members wanted to raise in June. Given the ADP Report and the Fed is looking for labor and wages to slow, the chances for an additional rate hike in July is very high. The chances for an August rate hike has increased.
What does this all mean? Mortgage and bond rates have hit levels not seen since last year and Thursday and Friday saw rates climb into and over 7%, while the 10yr Treasury peaked at 4.09%. This could spook buyers.
BUT WAIT! The market is extremely volatile, and we started the week with better numbers. There are major reports that are going to change rates and they should be positive to the downside.
TUESDAY
NFIB Small Business Optimism Index CAME IN SLIGHTLY HIGHER, We saw a small dip in bond pricing and has come back.
3-Year Note Auction
WEDNESDAY
Mortgage applications
CPI (Consumer Pricing Index for June) BIG REPORT! Last June Inflation was at its Peak!
10-year Bond Auction Looking for good demand.
THURSDAY
PPI (Producer Pricing Index) This is what companies pay for raw goods. This could be a negative number meaning that producers are paying less for goods than a year ago No inflation!
30-year Bond Auction looking for good demand.
Friday could be a day for day drinking!!!! No reports
Bottom line
We are back on the roller coaster, but the ride is almost over. We are now in the time when inflation was out of control last year. That’s when the Federal Reserve should have acted not waited until February. Reassure your clients that rates are volatile, and they will get better!
Please feel free to call me if you have any questions.
Have a great week.
John
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