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Events
This Week:
Unemployment
Fell
ISM
Services Rose
Jobless
Claims Down
Manufacturing
Up
Events
Next Week:
Tues
1/10
3-yr Auction
Wed
1/11
Beige Book
10-yr Auction
Thur 1/12
Retail Sales
30-yr Auction
Fri
1/13
Sentiment
Import Prices
Trade Balance
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Unemployment
Rate Falls
During the
first week of the new year, mortgage rates continued to be influenced by
the same factors as in 2011. Stronger than expected US economic data
roughly offset continued concerns about Europe, and mortgage rates ended
the week nearly unchanged.
Friday's
Employment report provided further support that the US economy is gaining
strength to begin the new year. Against a consensus forecast of 150K, the
economy added 200K jobs in December. The Unemployment Rate unexpectedly
fell to 8.5%, the lowest level since February 2009, from 8.7% in November.
The decline was partly due to the increase in jobs and partly due to people
dropping out of the labor force. Average Hourly Earnings, a proxy for wage
growth, increased 2.1% from one year ago. This was an encouraging report in
nearly every area.
While
prospects in the US appear to be picking up, signs of improvement in Europe
have been frustratingly slow to emerge. Bond yields in troubled countries
remained at elevated levels, and European banks had to pay higher than
expected costs to raise additional capital. Investors are still demanding
very large premiums to lend money to European countries which are
considered risky, making recovery efforts even more costly. Relatively
safer assets, such as US mortgage-backed securities (MBS), continued to
benefit this week from the lack of progress in Europe.
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Also Notable:
- The ISM Manufacturing index rose to the highest
level since June
- The value of the euro relative to the US dollar
fell to the lowest level since September 2010
- Tensions with Iran pushed oil prices up to $103
per barrel, the highest level since May
- The Treasury will auction $66 billion in 3-yr,
10-yr, and 30-yr securities next week
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Average
30 yr fixed rate:
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Last
week:
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-0.03%
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This
week:
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0.00%
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Stocks
(weekly):
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Dow:
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12,400
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+200
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NASDAQ:
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2,675
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+75
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Week
Ahead
Next
week, the Fed's Beige Book will come out on Wednesday. Retail Sales will be
released on Thursday. Retail Sales account for about 70% of economic
activity. Import Prices, the Trade Balance, and Consumer Sentiment will
come out on Friday. In addition, there will be Treasury auctions on
Tuesday, Wednesday, and Thursday.
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