The Day Ahead: Fannie Mae Needs Another Bailout; Markets Wait for Jobs Report
Trading is cautious ahead of the month’s most important indicator. Equities jumped more than 2% on Thursday on optimism for the labor market and positive earnings from blue-chip companies, but sentiment is more cautious in the final hour before nonfarm payrolls.
Dow Futures continue to dance around the 10k level while S&P 500 futures trade half a point higher at 1,064. WTI crude is back below the $80 per barrel mark, but Spot Gold is up more than $3 to $1,093.38. Meanwhile, the dollar is weaker against the yen, euro, and Aussie dollar, but stronger against the Canadian loonie.
Outside of markets the news is that Fannie Mae has asked for a fourth dose of bailout funds from the government. The government-sponsored mortgage lender announced losses of $19 billion from July to September, and requested $15 billion to fill the hole.
“The losses stemmed from the increased costs of buying up bad mortgage-backed loans as part of the government's efforts to support the housing market,” said the BBC. “It said it would use additional government aid to cover future losses on bad mortgage loans, as well as helping to cover its third-quarter losses.”
With its cousin Freddie Mac, the two organizations have now asked for more than $100 billion in taxpayer aid.
Key Events Today:
8:30 ― The month’s most important indicator, the Employment Situation report, is expected to see the jobless rate tick up one-tenth to 9.9%. Monthly lay-offs are expected to be 175k, which is still awful, but economists will point out that the trend is in the right direction and that things were much worse in the first quarter.
“Since the start of recession, the labor market has lost more than 7 million jobs and we believe that figure may rise as high as 8 million by the end of the labor market cycle,” said Ellen Zentner, macroeconomist at BTMU, said. “The pace of job loss is slowing, but losses will continue through the first quarter of next year.” She looks for 185k losses in the month.
3:00 ― The once-ignored Consumer Credit report has been getting lots of attention during the recession as analysts look to the data to track trends in consumer spending. Ahead of the holiday season the trends aren’t looking good: Credit fell $19 billion in July and $12 billion on August, and for September the Fed report is expected to show further subtraction in the realm of $10 billion.
“Consumers, plagued by ongoing weakness in the labor market, are still in the process of reducing their debt and credit markets remain tight, limiting access for those who seek it,” said economists at BBVA. “The ongoing reduction in credit outstanding is one of the factors that lead us to believe that consumer spending will remain subdued throughout the recovery process.”
3:00 ― Elizabeth Duke, a governor at the Fed, delivers keynote address to the Chicago Fed's 5th annual Community Bankers Symposium.