Labor market softer than many thought, cooling mortgage rates leave borrowers unimpressed
Main U.S. indexes edge green; Nasdaq out front, up ~0.3%
Materials lead S&P 500 sector gainers; Financials weakest group
Euro STOXX 600 index up ~0.4%
Dollar, gold, crude slip; bitcoin rises slightly
U.S. 10-Year Treasury yield dips to ~3.79%
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LABOR MARKET SOFTER THAN MANY THOUGHT, COOLING MORTGAGE RATES LEAVE BORROWERS UNIMPRESSED
Data released on Wednesday suggested the labor market is not quite as robust as many thought, while easing mortgage rates are failing to entice potential home buyers from the sideline.
The Labor Department issued its preliminary estimate of the upcoming annual benchmark revision to payrolls data for the twelve months through March 2024 USREVP=ECI.
The revision showed the U.S. economy added 818,000 fewer jobs than the 2.9 million payroll adds originally reported over that time period, suggesting that the apparent softening in the labor market could be a bit more pronounced than many assumed.
It's the largest downward preliminary revision since the global financial crisis, and cements the likelihood that the Federal Reserve will embark on its rate cutting phase at the conclusion of its September policy meeting.
"The labor market appears weaker than originally reported. A deteriorating labor market will allow the Fed to highlight both sides of the dual mandate and investors should expect the Fed to prepare markets for a cut at the September meeting," writes Jeffrey Roach, chief economist for LPL Financial. "A weaker-than-expected job market could pave the way for the Fed to cut by a half percentage point in September."
Here's a chart which compares initial vs. final benchmark revisions going back to 2003:
Elsewhere, while the cost of financing home loans continued to drift lower last week but would-be borrowers are unimpressed.
The Mortgage Bankers Association's (MBA) average 30-year fixed contract rate USMG=ECI shed four basis points to 6.50%.
But while that rate has been below 7% since mid-July and remains on a fairly steady cooling trend, applications for loans to buy homes USMGPI=ECI and refinance existing mortgages USMGR=ECI dropped by 5.2% and 15.2%, respectively.
With all signs pointing to a September rate cut from Powell & Co, potential buyers and sellers could be standing on the sidelines ahead of what is likely to be a more substantial cooldown in mortgage rates, throwing the sector into wait-and-see mode.
Even so, the 30-year fixed rate is now 81 basis points cooler than the same week last year.
Refi demand has surged 90%, while applications for loans to purchase homes - considered among the more forward-looking housing market indicators - is down 8.0% over the same time period:
(Stephen Culp)
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FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:
S&P 500 NEARS ITS JULY RECORD HIGHS, BACKS OFF - CLICK HERE
NASDAQ COMPOSITE: TRADERS HOLD THEIR "BREADTH" - CLICK HERE
HAS THE DOLLAR'S WEAKNESS FURTHER TO RUN? - CLICK HERE
BAD MEMORIES OF SUMMER SELLOFF FADING - CLICK HERE
LEARNINGS FROM Q2: MORE CAUTION - CLICK HERE
MINERS SUPPORT THE STOXX - CLICK HERE
EUROPEAN FUTURES STEADY AS BOUNCE STALLS - CLICK HERE
JOBS IN FOCUS AFTER THE REBOUND - CLICK HERE
Preliminary benchmark payroll revision https://reut.rs/4dIsPKG
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