ADP Job Gains Show Strong Numbers

Mortgage bonds continue to take a beating today, as the stock market recovers some of their losses absorbed over the past two trading days. Last night’s State of the Union Address was a pro-America talk that touted the accomplishments of the past year. It was met with approval by stock investors, many who originally sold off prior to the SOTU for fear of Trump saying something that would cause fear throughout the system. Once it was over, investors stepped back in to buy stocks. 

ADP released their report of Job gains for the month of January, and again it was well above the market’s expectations. While most anticipated between 185,000 – 195,000, the actual report showed 234,000 new hires. A deeper look into the numbers reveals that once again most of the gains were from the Service Sector of the economy, which added 212,000 new jobs. This includes education, health services, hospitality and administrative services. 

The Federal Reserve will be announcing their decision on interest rates this afternoon. We do not expect a rate hike to be on the agenda. We should hear an update on the plan for Quantitate Tightening, which is one of the primary drivers of higher mortgage interest rates in recent weeks. As that program ramps up, we will see continued upward pressure on rates, which isn’t good news for the housing market.   

The bond market continues down an ugly path for interest rates. We will maintain our locking bias.