Current position: Carefully Floating
Stocks are continuing to rebound higher, and mortgage bonds are also higher, following through on the positive day yesterday.
In yesterday's update, we covered the seasonal adjustments and population controls that were present in the BLS Jobs Report and how that impacted the numbers and made January look much stronger than it really was.
But the job picture is truly weaker, and comments from ZipRecruiter's CEO, which our friend Peter Boockvar broke down in his commentary, say it best.
"With an increasingly uncertain macroeconomic backdrop, employers have moderated their hiring plans and reduced their recruitment budgets in the first weeks of the year. Online job postings in our marketplace remained in line with the low point of the 2022 holiday season, rather than following the longstanding seasonal pattern of beginning a run-up in January."
ZipRecruiter expects there to be a soft hiring environment throughout 2023.
Initial Jobless Claims
Even though hiring plans look softer, employers are clearly trying to hold onto the workers that they currently have. Initial Jobless Claims, which measure individuals filing for unemployment benefits for the first time, fell by 3,000 to 192,000 and remains below 200,000. Continuing Claims, or those that continue to receive benefits after their initial claim, fell 37,000 to 1.65M. While these are volatile numbers, it's clear that once workers are laid off, they have a harder time finding new work.
The second reading on Q4 GDP showed a slight moderation. The first reading showed that the US economy grew by 2.9%, but that moderated to 2.7% in this morning's reading. There will be one more final revision to Q1 GDP next month.
CoreLogic Loan Performance
CoreLogic released their loan performance insights for December, showing that overall delinquencies and foreclosure rates remained near record lows. Loans 30 days or more delinquent increased slightly from 2.9% to 3%. Those with 90 days or more remained at 1.2%. Lastly, loans in foreclosure were unchanged at a near multi-decade low of 0.3%.
For all the talk of housing being unhealthy, all the delinquency figures are at very low levels. For perspective, total delinquencies were more than six times higher during the housing crash.
Mortgage Bonds have broken back above the 99.711 level and are now up against a ceiling of resistance at 99.845. If bonds can get above this ceiling, the next stop is 100.094, which is roughly 24bp above present levels. The 10-year is trading at 3.93%, still just above an important technical level of 3.90%. Tomorrow's PCE report will be important and potentially market-moving. We are hoping for a better number than the CPI, especially since housing has about half the weighting in the PCE and was the biggest contributor to inflation with the CPI. With bonds rebounding, begin the day carefully floating.