Markets React to the American Job Pain

Last Week in Review: Markets React to the American Job Pain

This past week was filled with a lot of market-moving news for the mortgage and housing industry. By week’s end, interest rates continued to stabilize, while stocks set new all-time highs. Let’s break it all down:

Enormous Government Spending on the Way

On Wednesday, President Biden laid out his $2.3T infrastructure proposal called the American Jobs Plan. Whether you like it or hate it, this plan calls for both big spending and tax increases.

This plan is a long way from passage, and it will likely be met with tons of both praise and criticism in the days and weeks ahead, thereby inviting market volatility.

Stocks generally do not like higher taxes, and bonds/rates do not like additional bond issuance, which will be needed to fund any plan, so seeing both initially improve was surprising, yet welcome.

Home Sales Not Pending

Pending home sales is a measure of signed contracts for existing homes. The February Existing Home Sales data showed 1.03M homes for sale, which is down a whopping 29% from a year ago, representing the largest year-over-year decline on record. It also represents the lowest supply of available homes on record.

The lean amount of supply, low interest rates, and scorching demand continues to drive home prices higher, as evidenced by the 11% year-over-year price increase reported by Case Shiller.

Private Sector Jobs Returning

The ADP Report on Wednesday showed a whopping 517,000 private-sector jobs created. This figure met frothy expectations and the largest monthly increase since September. The main driver of the increase is the reopening of more economies across the U.S. More vaccinations, coupled with declining cases and further reopenings should continue to drive better job figures in the months ahead.

Bottom line: Rates remain historically low. With the anticipation of better days ahead and so much stimulus, we should expect a further uptick in rates from here.