Economic Update for the Week Ending February 3, 2024
The Dow and S&P closed the week at record highs - It was quite a week on Wall Street! Fed Chairman Powell left interest rates unchanged and commented that there would not be a rate drop in March either. This sent stocks lower. On Wednesday ADP, the world's largest payroll company, estimated that only 100,000 new jobs were created in January. That was great news for investors, as a slowing job market could cause the Fed to drop rates. Bond yields and mortgage rates fell to their lowest levels of the year on Wednesday and Thursday. Unfortunately, investors learned that ADP was wrong, they have been every month so it's no surprise when the jobs report was released on Friday morning. It showed that 353,000 new jobs were created. That was almost double the numbers analysts expected. Bond yields and mortgage rates rose back to where they were on Wednesday, and stocks jumped for a second straight day, ending the week with all indexes higher. The Dow Jones Industrial Average closed the week at 38,654.42, up 1.4% from 38,109.43 last week. It is up 2.6% year-to-date. The S&P 500 closed the week at 4,958.61, up 1.4% from 4,890.97 last week. The S&P is up 4% year-to-date. The Nasdaq closed the week at 15,628.95, up 1.1% from 15,455.36 last week. It is up 4.1% year-to-date.
U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 4.03%, down from 4.15% last week. The 30-year treasury bond yield ended the week at 4.22%, down from 4.38% last week. We watch bond yields because mortgage rates follow bond yields.
Mortgage rates - Every Thursday Freddie Mac publishes an interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of February 1, 2024, were as follows: The 30-year fixed mortgage rate was 6.63%, down from 6.69% last week. The 15-year fixed was 5.94%, almost unchanged from 5.95% last week.
January hiring surge shocked experts - The Department of Labor and Statistics reported that 353,000 new full-time jobs were added in January. That was almost double the number of new jobs that analysts expected. The unemployment rate remained at 3.7% in January, unchanged from November and December. Analysts expected the unemployment rate to increase but an uptick in hiring has kept the unemployment rate near a 60-year low. The Fed is looking to get the unemployment rate to the low to mid 4% range. With employers' struggling to find workers, wage gains are outpacing the inflation rate. That leads to higher consumer spending which fuels inflation. Average hourly wages increased 4.5% year-over-year, up from a year-over-year increase of 4% in December. Economists expected a 4.1% increase. Bond yields and mortgage rates, which had hit a low for the year on Thursday, rose on Friday after the report was released. Investors and experts feel that some point the economy will slow and the Fed will begin to drop interest rates from their current levels which are at the highest levels in over 20-years.
