Market Commentary

Updated on December 6, 2024 10:14:16 AM EST

Today's big news was the release of November's Employment report that showed 227,000 new jobs were added to the economy and a 4.2% unemployment rate. Analysts were expecting to see 200,000 new payrolls, but feared a larger upward revision to October's number was possible. This morning's release did show a change from up 12,000 to up 36,000 for October, still well short of predictions before that month's data was released last month. The slightly higher than expected November number is offset by the favorable increase in the unemployment rate.

The first two headline numbers could justify a flat open in bonds since there were no major surprises in either. What makes it surprising that we didn't see a negative reaction in the bond market was the earnings data within the report. November's earnings rose 0.4%, exceeding forecasts of 0.3%. Furthermore, they rose 4.0% annually when traders were expected to see 3.9%. Stronger earnings are an inflation red flag because rising wages often fuels inflation throughout the broader economy, making long-term securities such as mortgage bonds less appealing to investors. Fortunately, bond traders have their own game plan this morning, leading to lower mortgage pricing.

This morning's second economic release also gave us results that should be considered bad news for rates. The University of Michigan announced their initial December Index of Consumer Sentiment stood at 74.0. The increase from November's 71.8 means surveyed consumers feel better about their own financial and employment situations than was thought. It was expected to rise from November, but only to 73.0. The larger increase is a sign that consumers are more likely to spend than last month, fueling economic growth.

Next week doesn't bring us a large number of events that are expected to influence mortgage rates, but does have a couple of highly important inflation readings in addition to two Treasury auctions that may come into play during afternoon trading. The week starts light with nothing of importance set for Monday. We should see the most movement in rates midweek. Look for details on all of next week's activities in Sunday evening's weekly preview.