The Labor Department reported that initial jobless claims edged lower last week, while recurring applications for unemployment benefits rose for a seventh straight week to the highest level since April 15th. The labor market is becoming increasingly vulnerable as the climbing continued jobless claims signal a weakening labor sector. Claims in regular state programs decreased 3,000 to 217,000 from the prior week’s upwardly revised 220,000 for the week ending November 4th. The four-week moving average climbed to 212,250 from 210,750 the prior week. Continuing claims, which include people who have received unemployment benefits for a week or more, increased 22,000 to 1.834 million for the week ending October 28th.
The Commerce Department reported the trade deficit increased in September as the value of imported goods climbed more than exports. The deficit increased to $61.5 billion in September from a deficit of $58.7 billion in August. Exports climbed 2.2% to $261.1 billion and imports increased 2.7% to $322.7 billion.
The Federal Reserve reported consumer credit increased $9.1 billion in September after dropping $15.8 billion in August. The decline in August reflects a record drop in non-revolving credit tied to student loan forgiveness by the Biden administration. Credit card debt increased $3.1 billion to $1.288 trillion after climbing $14.5 billion the previous month. Auto and student loan debt increased $5.9 billion in September after declining $30.3 billion in August. Total non-revolving credit climbed to $3,689 trillion. These figures are not adjusted for inflation.
The Commerce Department reported wholesale inventories climbed 0.2% in September to $901.8 billion. Year-on-year wholesale inventories have declined 1.2%. Wholesale trade sales rose 2.2% in September after climbing 2.0% in August, with year-on-year sales up 0.9%. The ratio of inventory to sales declined to 1.33 in September from 1.36 in August. The ratio was 1.41 in June.
The University of Michigan’s preliminary index of consumer sentiment declined in November to a six-month low of 60.4 from 63.8 in October. Consumers ramped up inflation expectations, adding to concerns about labor market weakness and high borrowing costs. The long-term inflation expectations climbed to the highest level since 2011, increasing to 3.2% in November from 3.0% the prior month. The one-year-ahead inflation expectations jumped to 4.4% from 4.2% in October. The index of current conditions dropped to 65.7 from 70.6 the prior month while the index of expectations decreased to 56.9 from 59.3.
The Mortgage Bankers Association reported the MBA index of mortgage applications climbed last week after mortgage rates plunged by the most in more than a year, helping generate the biggest advance in home purchase applications since early June. The index increased 2.5% for the week ending November 3rd. Refinancing applications rose 1.6% to 347.3 from 341.7 the prior week. Home purchase mortgage applications increased 3.0% to 129.0. Refinancing made up 31.4% of applications with an average loan size of $243,700, while purchases average loan size was $405,200. The average contract rate on a 30-year fixed-rate mortgage plunged 25 basis points to 7.61% from 7.86% the prior week.
BOND MARKET REVIEW
Rates climbed last week on concerns about inflation, the national debt and the expectation the Fed will leave rates higher for longer. Friday’s yields for the 2-, 5-, 10- & 30-year Treasury benchmarks securities closed at 5.06%, 4.68%, 4.65% and 4.76%. The 2yr/5yr, 5yr/10yr, 10yr/30yr and 2yr/30yr spreads closed at -38, -3, 11, and -30 basis points respectively.
Mr. Clark has been in investment banking since 1983. He is a Chartered Financial Analyst. He has been a fixed income strategist at Stephens Inc. since 1996, developing investment strategies, policies and procedures for institutions consistent with overall asset/liability management.Read full bio