Good Morning!
Hope you had a wonderful 3-day weekend! I have been a little under the weather, but with 2 kids, there are no breaks, so I had to just push through it. We had a fun-filled family weekend that included family dinner with my wife’s family and dinner at close friend’s house. Hope you all had an amazing weekend as well!
Last week was packed with data and all of it helped move the 10 YR Yield down from 4.24% to 4.05%, as of this morning. This is near the lowest since the 3 days at the end of November and before that, 8 days at the end of October, and before that, 7 days in the middle of September, and finally, before that was 2 days in April of 2025. As you can see, every time we get close to a break-through, we get a few days of reprieve and then head right back up into the 4.07%-4.21% range.
I hope we finally break through as the job market seems to be slowing more than last year and because inflation is trending back down. However, it feels like the bond market/traders aren’t letting the 10 YR get below 4%.
It’s a very busy week for housing data. Not much in regards to market moving news until Friday’s December PCE and Q4 GDP. These are from 2 months ago, so I don’t expect the market to react too much to these reports.
Have a wonderful week ahead!
1 Year Look at the 10 YR Yield:
Last Month’s Market Commentary:
Headline Jobs Beat, But the Details Tell a Softer Story
- January’s report from the Bureau of Labor Statistics showed 130,000 jobs added, more than double the 55,000 forecast. The unemployment rate edged down from 4.4% to 4.3%.
- At first glance, it looks solid. But the underlying trend may be weaker than the headline suggests. Other labor data paints a softer picture:
- ADP reported just 22,000 private payroll gains.
- Revelio Labs showed a 13,300 decline in nonfarm jobs.
- Job openings fell sharply to 6.54 million in December.
- Challenger, Gray & Christmas reported the highest January job cuts since 2009 and the lowest January hiring announcements in its 17-year history.
- Revisions also weighed on the trend. November and December payrolls were revised down by 17,000 jobs combined. More significantly, 2025 job growth was revised lower by 403,000, leaving just 181,000 net jobs for the year — an average of only 15,000 per month.
- Seasonal adjustments add another wrinkle. January typically sees heavy layoffs after the holidays. In raw terms, payrolls actually fell by 2.65 million jobs. After applying the large seasonal adjustment, that translated into the reported 130,000 gain.
- The takeaway: The headline beat may overstate the strength of the labor market as broader data continues to point toward cooling momentum.
Headline Jobs Beat, But the Details Tell a Softer Story
- Consumer prices rose 0.2% in January, bringing the annual inflation rate down to 2.4%, the lowest level in eight months and down from 2.7% previously.
- Core inflation (excluding food and energy) increased 0.3% for the month and eased to 2.5% year over year.
- Shelter remains the largest contributor to inflation, accounting for roughly 35% of headline CPI and 44% of core CPI. January’s modest shelter readings helped pull the annual rate lower, though a sharp increase in airline fares added some upward pressure.
- The Federal Reserve continues balancing easing inflation against signs of a cooling labor market. Sticky price pressures argue for patience, while softer employment data strengthens the case for rate cuts. The Fed held rates steady in January after cutting three times late last year. While the Federal Funds Rate doesn’t directly set mortgage rates, it heavily influences broader borrowing costs.
- Chair Jerome Powell has emphasized there is “no risk-free path,” signaling that upcoming inflation and jobs data will remain critical to the policy outlook.
Existing Home Sales Ease to Start 2026
- After a strong rebound in December, existing home sales declined 8.4% month over month in January, according to the National Association of REALTORS®. Sales were also down 4.4% year over year.
- Housing inventory slipped 0.8% from December to 1.22 million homes, though supply remains 3.4% higher than a year ago.
- NAR Chief Economist Lawrence Yun described the drop as “disappointing,” but cautioned that unusually cold weather and heavier-than-normal precipitation in January make it difficult to determine whether the slowdown reflects broader market weakness or a temporary seasonal effect.
- Encouragingly, affordability continues to improve. NAR’s Housing Affordability Index shows homes are now the most affordable they’ve been since March 2022, a trend that could support demand as we move further into the spring market.
Job’s Report Insights From David Rosenberg @ Rosenberg Research
“There is quite a bit of hair on this report that needs to be discussed, and that is why I am not changing my view on anything. Here are the reasons why, despite the glow, I am going to need to see more information to garner confidence in this data release:”
- While it is true that construction and manufacturing jobs were bright spots, the areas of the economy that cater directly to the consumer, as in the retail and wholesale trade sectors, were flat.
- Despite the boom in Transportation stocks, employment in this sector (including warehousing) fell by -11k.
- The financial sector shed -22k (down in three of the past four months), which was the steepest decline since we had no economy in April 2020.
- The prior hot leisure-hospitality sector virtually flattened in January compared to the +24k prior six-month average.
- Once again, all the jobs, and then some, were created in one sector: health-education services, which surged by +137k, and this is a run-up we have not seen since August 2020. The other 80% of the economy, yet again, lost jobs (-7k) even with the better tone in construction and manufacturing.
- After seasonal adjustment, and this is definitely difficult to explain, the revamped Birth-Death model, which we had expected to detract from the headline payroll figure, added +157k to the number. Strip out that skew, and again, employment from the actual survey showed a net decline of -27k. Do not expect that number to be reported on bubble vision.
- There is also a case to be made that the number enjoyed a nice skew from generous seasonal-adjustment factors, seeing as the “raw” data showed a -630k decline in the Household Survey and a -2.65 million plunge in the payroll data.
- Finally, the response rate to the Household Survey is now so low, at just 64% compared to the 82% pre-COVID norm, that the error term is wide enough to force us to take these reports with a giant grain of salt — and the reason for the huge back revisions we have been seeing this cycle.
This Week’s Important Data Releases:
- MON – Markets Closed for President’s Day
- TUES – ADP Employment Weekly, NAHB Housing Market Index (36 & down from Last month)
- WED – MBA Mortgage Applications, Housing Starts, Durable Goods Orders, 20-Year Bond Auction, Fed Minutes, Capacity Utilization, Industrial Production
- THURS – Jobless Claims, Pending Home Sales, Philly Fed Manufacturing,
- FRI – PCE (Personal Consumption Expenditures) for December, Q4 GDP, New Home Sales, Michigan Consumer Sentiment
Thanks for reading and have a great day!
