Market Commentary

Updated on December 5, 2024 10:06:47 AM EST

Yesterday's afternoon events didn't have much of an impact on mortgage rates. Fed Chairman Powell's comments at his speaking engagement didn't change the markets opinion that the Fed is likely to cut key short-term interest rates by a quarter-point at the December 17-18th FOMC meeting. The Fed Beige Book showed economic activity rose in most of the Fed's 12 regional districts. Three districts reported modest to moderate growth while two said activity had slowed slightly. Bonds did rally after rates and our report were posted yesterday morning. However, the move came well before these events took place. In other words, they weren't the reason for the intraday improvement in rates, but didn't derail it either.

Last week's unemployment update was today's only relevant economic data. It revealed 224,000 new claims for jobless benefits were made last week. This was up from the previous week's revised 215,000 and higher than forecasts of the same number. We can label the report good news for bonds and mortgage pricing because rising claims are a sign of weakness in the employment sector. However, this report is only a weekly snapshot of the sector and doesn't include many key metrics that other related reports address. Those facts, coupled with the release of tomorrow's key report that gives us much more insight, are likely why we haven't seen a positive reaction to the data.

Tomorrow brings us the release of the monthly governmental Employment report for November. Analysts are now expecting the 8:30 AM ET report to show the U.S. unemployment rate rose 0.1% from October's 4.1% and approximately 200,000 new jobs were added to the economy. The third headline number is the average hourly earnings reading that is predicted to have risen 0.3%. Favorable news for bonds and mortgage rates would be a larger increase in the unemployment rate, a noticeably lower payroll number and flat earnings. This report is extremely important and influential to the financial and mortgage markets. Surprisingly strong or weak results could cause a sell-off or a huge rally in bonds and a noticeable change in mortgage pricing.

The University of Michigan will close this week's economic calendar with the release of their Index of Consumer Sentiment for December at 10:00 AM ET. Forecasts have it coming in at 73.0, up from November's final reading of 71.8. The increase would mean surveyed consumers feel better about their own financial and employment situations than they did last month. Since stronger sentiment is an indication that consumers are more willing to spend, a lower reading would be considered good news for mortgage rates.

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