Volatile weeks ends with downturn
It has been a roller-coaster week for the stock market with the Dow Jones and 10-year Treasury note yields seeing sharp peaks and valleys in reaction to the conflict with Iran.
As news of the attack on military bases in Iraq came out on Monday, the Dow sank to an intra-day low of 28,483. As tensions began to ease midweek, the Dow rebounded 500 points with the Nasdaq and S&P 500 rallying to close at record highs on Thursday.
On Jan. 3, one week ago, the 10-year Treasury note yield slipped to 1.786% in reaction to the news of United States drone strikes killing Iranian Major General Qasem Soleimani. Now, one week later, the 10-year note yield is trading at 1.85%.
Oil prices also cooled off which warded off a potential scare in the rise of gas prices for American consumers. Up 4% at one point, crude futures eventually settled down 5%.
More positive news about jobs has the market feeling confident this week. Thursday's report from ADP and Moody's Analytics showed a surge in employment numbers to end the year. Private payrolls rose by 202,000 jobs, against expectations for a gain of 150,000. This report also revised up November's report to 124,000 from 67,000. What's interesting for our line of work is that construction saw an increase of 37,000 jobs, it's largest gain since April 2019.
The December jobs report from the Labor Department was not nearly as positive. Just 145,000 jobs were added in that month, against expectations for 160,000 jobs added. However, the unemployment rate held steady at just 3.5%, which was a positive, plus the percentage of discouraged or underemployed workers decreased to 6.7%. That's the lowest reading for that stat since records started being kept in 1994.
Wage growth also disappointed analysts, rising just 2.9% year-over-year against a 3.1% projection.
This jobs report caused Dow futures to sink Friday morning, ending the very volatile week on a low note. The yield on the 10-year Treasury note also started to decline Friday morning.
International bullet points
- U.S. and China set to sign phase one trade deal Jan. 15 at the White House
- President Trump says he will travel to Beijing after the signing for further negotiations
- Prime Minister Boris Johnson's Brexit deal was approved by the House of Commons (330 in favor, 231 against).
- United Kingdom is set to leave the European Union Jan. 31
- U.K. has until Dec. 31 of this year to agree on an official trade deal with the E.U.
Housing showing more optimism
Freddie Mac's 30-year fixed-rate mortgage average for this week went down again and is now sitting at 3.64%, it's lowest level in 13 weeks.
Those low rates combined with a strong labor market (meaning more purchasing power) contributed to a strong housing market sentiment reported this week by Fannie Mae. December's reading came in at 91.7, closing in on August's record high of 93.8.
People looking to sell their home are also more optimistic. According to the report, 65% of people surveyed believed that it was a good time to sell. That's up 7% year-over-year. Fannie Mae's economic group predicts that home sales will go up by 1.9% in 2020 compared to 2019's rate of 1.7% growth. Most of that will come in new home sales as the group predicts builders will start work on 975,000 homes this year.
