News You'll Use

Mortgage rates fell this week, with the market continuing to price in aggressive Fed rate cuts in 2024. This week has been all about the labor market, with JOLTS data on Tuesday and monthly ADP Jobs data on Wednesday. Nonfarm payrolls on Friday came in mostly in-line with expectations, except for a move lower in the unemployment rate from 3.9% to 3.7%.

As rates have been coming down, the market has been pricing in Fed rate cuts aggressively for 2024. The problem is that the message of the Fed has been that they expect to keep rates higher for longer. The only way we see rate cuts happening in early 2024 is if the Fed thinks the economy has drastically weakened and it needs to cut rates to stimulate the economy. If they don't see the labor market weaken, the Fed will take their time in cutting rates into that latter part of 2024 if inflation continues to come down. The Fed was late in raising rates in 2022 and we fear they will also be late to cutting rates next year. That said, the Fed is data-dependent still, so expect mortgage rates to swing with every move in the economic data.

• US 10-year Treasury on Thursday morning is at 4.12%

• Factory Orders came in lower than analysts' expectations (-3.6% vs expectations of -3.0%)

• JOLTS Index came in lower than analysts' expectations (8.733 mm quits vs expectations of 9.3mm quits)

• ISM Services Index came in-line with analysts' expectations (52.7)

• ADP Employment Change came in lower than analysts' expectations (103k jobs vs expectations of 130k jobs)

• Initial Jobless Claims came in-line with analysts' expectations (220k claims)

• Mortgage Applications rose 2.8% this week