The New Year has not been happy for stocks as they close the week with the worst start in history, but that leads to better MBS pricing! Stocks tumbled after the start of the year to pull back about 6% over the 5 day period. While this happened, MBS pricing benefited by a hefty 23/32 increase. While the vast majority watched with concern as world markets tumbled on the backs of China’s building recession and tensions over North Korea announcing that it had successfully tested a hydrogen bomb, mortgage rates quietly edged their way lower for the week, all while the U.S. economy posted decent reports throughout. This was especially true on the job front, as 292K jobs were added for the month of December.
Unfortunately for stocks, events abroad and the flight to safety by many investors caused the huge pull back in stock markets despite the positive news. Typically you will see mortgage rates increase with positive job growth news but the fact that average hourly earnings, which is a huge indicator of wage growth, fell well short of expectations with a flat reading. The lack of wage growth and inflation was good news for mortgage rates. The JOLTS report will come out on Tuesday which measures job openings and labor turnover rates. Retail Sales and the Producer Price Index will be released on Friday. Investors will be watching to see if tensions concerning the Middle East continue to grow as well as if China’s slow down continues.