Investors move to treasuries
The belief that the Fed will cut rates this year has investors rushing toward Treasuries, particularly short-term notes. The two-year yield hit its lowest level since December 2017, tumbling by more than a quarter-point since last week. The Benchmark 10-year yield also dropped to 2.06%, its lowest level since September of 2017.
The trade war with China is a large part of this, but investors are also monitoring a bleak manufacturing report. The ISM Manufacturing index was expected to show a small gain but instead declined by 0.7 points. New orders increased, but production level went down contributing to the decline.
All of this has led investors to believe that not only will the Fed cut rates in 2019, and cut them soon, but that they’ll also cut rates in the first quarter of 2020.
Job market update
There was a big surprise this morning from the Labor Department showing dramatically slowed job growth. Analysts were expecting job growth numbers around 180,000 for nonfarm payrolls. Instead, jobs increased by just 75,000 in the month of April. The job count for March was also revised down. The unemployment rate has remained unchanged at a 50-year low of 3.6%. Wages saw a small increase but that growth has also slowed.
Private payrolls showed a surprising slow down this week. The ADP and Moody’s Analytics data shows payrolls going up by just 27,000. It was estimated that number would be closer to 173,000. That’s the worst reading since March of 2010, the time that the economy was climbing out of the nadir of the recession.
The data shows that large companies (50-499 employees) fared pretty well in May. However, it was the small companies, with fewer than 50 employees, that took the brunt of it reporting a loss of 52,000 jobs. Almost all of that small business loss came at firms with fewer than 20 people.
Weekly jobless claims were unchanged for this week, according to the Labor Department. This still indicates labor market strength, despite the losses in the private sector, which is essential for economic growth.
Oil tanks again
Oil prices have dropped to their lowest levels since January of this year, thanks to a surging stockpile. The U.S. Energy Information Administration reports that crude inventories jumped by 6.8 million barrels for the week ending May 31. CNBC shows just how quickly the price of oil shares dropped off after the news of the stockpile was reported.
In addition to this, U.S. weekly production also rose to an all-time high 12.4 million bpd, according to a preliminary reading from EIA. The market will likely shift again in the coming weeks as OPEC and its oil market allies are expected to discuss production policy in their upcoming meeting.
About the Author: Movement Staff
The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement’s staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.
For more useful tips and mortgage information, contact Pam at Movement Mortgage today by visiting her website. You can also visit her at 7773 S. Suncoast Blvd., in Homosassa, Florida. Call her directly at (352) 634-0716.
Courtesy of Pam Cleary, Branch Manager, Movement Mortgage.
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