Morning Report: The economy added 692,000 jobs in June.

Vital Statistics:

 LastChange
S&P futures4,275-5.8
Oil (WTI)73.600.32
10 year government bond yield 1.46%
30 year fixed rate mortgage 3.18%

Stocks are lower this morning on fears of the Delta variant of COVID. Bonds and MBS are up.

Mortgage applications fell 6.9% last week as purchases fell 5% and refis fell 8%. “Mortgage rates were volatile last week, as investors tried to gauge upcoming moves by the Federal Reserve amidst several divergent signals, including rising inflation, mixed job market data, strong consumer spending and a supply-constrained housing market that has led to rapid home-price growth,” said MBA Chief Economist Mike Fratantoni. “Purchase applications for conventional loans declined last week to the lowest level since last May. The average loan size for total purchase applications increased, indicating that first-time homebuyers, who typically get smaller loans, are likely getting squeezed out of the market due to the lack of entry-level homes for sale.”

The private sector added 692,000 jobs in June according to the ADP Employment Survey. Leisure and hospitality added almost half the jobs created last month, and manufacturing comprised about 10%. “The labor market recovery remains robust, with June closing out a strong second quarter of jobs growth,” said Nela Richardson, chief economist, ADP. “While payrolls are still nearly 7 million short of pre-COVID19 levels, job gains have totaled about 3 million since the beginning of 2021. Service providers, the hardest hit sector, continue to do the heavy lifting, with leisure and hospitality posting the strongest gain as businesses begin to reopen to full capacity across the country.”

The ADP numbers were above consensus, however May was revised downward. The Street is looking for 675,000 jobs in Friday’s report.

Ginnie Mae is announcing a new security which can contain loans with terms up to 40 years. This will add a new tool for servicers to modify loans for struggling homeowners. “It’s important that Ginnie Mae issuers have secondary market liquidity for options that our agency partners determine are appropriate for supporting homeowners in distress,” said Michael Drayne, Ginnie Mae’s Acting Executive Vice President. “Because an extended term up to 40 years can be a powerful tool in reducing monthly payment obligations with the goal of home retention, we have begun work to make this security product available.“

Pending home sales rose 8% in May, according to NAR. The Pending Homes Sales Index reached its highest level since 2005. “May’s strong increase in transactions – following April’s decline, as well as a sudden erosion in home affordability – was indeed a surprise,” said Lawrence Yun, NAR’s chief economist. “The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings.” The Northeast was the leader, with transactions increasing 15.5%.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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