The Dow is currently trading at 13,195 higher by 137 pts over last week. The S&P 500 is trading higher at 1,425. Gold is trading at $1,685 an ounce, while oil futures at $85.33 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.75/Gal.
Yields on 10-year notes, which move inversely to prices, are trading at 1.73%. 30-year bond yields are trading at 2.91%. Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 106.38 trading in a tight range pre-election. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.
In economic news this week; consumers increased their spending last month by the fastest rate since late winter, but at the expense of reducing their savings. Spending rose 0.8% while personal income climbed at a slower 0.4% pace. The sharp drop in savings however, suggests the recent pace of spending might not be sustainable.
The employment cost index, or ECI, which measures the price or cost of U.S. labor, and is a closely followed gauge that reflects how much companies, governments or nonprofit institutions are paying their employees in wages and benefits rose 0.4% in the third quarter. Over the past 12 months, employment costs have risen 2.0%, up from 1.7% in the prior three-month period. The number of new applicants for unemployment benefits fell slightly last week, but it remains stuck in a narrow range suggesting little change in hiring patterns over the past few months.
Led by brighter views on present employment and business conditions, the Conference Board’s gauge of consumer confidence rose in October to the highest level since February 2008. The consumer-confidence index increased to 72.2 last month from a downwardly revised 68.4 in September. Generally when the economy is growing at a good clip, confidence readings are at least 90. The last time the confidence gauge reached above 90 was in December 2007, when the recession began.
In the biggest news of the month; the U.S. created a better-than-expected 171,000 jobs in October and hiring rose faster in prior months than previously believed, but the politically sensitive unemployment rate rose a tick to 7.9%. The gains in hiring are a welcome sign that the economy is still continuing to expand at a moderate pace of around 2%. The biggest increases in hiring last month took place in professional services, health care, retail and leisure and hospitality. Altogether, the private sector added 184,000 jobs, with government subtracting 13,000 from the final total.
Still, the economy would have to add at least 250,000 jobs a month for several years to reduce the unemployment rate to the pre-recession level of around 6%. We haven’t come close to that rate of hiring since the recession ended in mid-2009.
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