Aurelia Butler

The average rate on the popular 30-year fixed-rate mortgage increased to 6.91%, the highest level since early July, from 6.85% last week, mortgage finance agency Freddie Mac (OTC:FMCC) said on Thursday. It averaged 6.62% during the same period a year ago.”Compared to this time last year, rates are elevated and the market’s affordability headwinds persist,” said Sam Khater, Freddie Mac’s Chief Economist.Mortgage rates have trended higher despite the Federal Reserve cutting interest rates three times since starting its monetary policy easing cycle in September. They have risen in tandem with U.S. Treasury yields amid a resilient economy and investor fears that President-elect Donald Trump’s proposed policies, including tax cuts, higher tariffs on imported goods and mass deportations, could reignite inflation. Mortgage rates track the 10-year Treasury note. Sales of previously owned homes surged to an eight-month high in November, mostly reflecting contracts signed in October and possibly September when mortgage rates were mostly lower. Sales could still rise in December after contracts increased to a 21-month high in November. Increased supply is pulling more buyers into the market, but rising mortgage rates could discourage some homeowners from putting their houses on the market, especially if they would need to buy another home.Many homeowners have mortgages below 5%. The so-called rate-lock effect could mean fewer homes being listed, reducing inventory and pushing up prices. This would combine with rising mortgage rates to reduce affordability for many prospective buyers. More

(Reuters) -Shares of SoFi Technologies (NASDAQ:SOFI) fell 6% on Thursday after KBW downgraded its stock on concerns over the fintech firm’s lofty valuation and ambitious financial targets, further cooling a months-long rally. Analysts at the brokerage firm rated the stock “underperform” and established a price target of $8 — nearly half of SoFi’s last closing price.The move reflects the challenges and higher expectations startups such as SoFi, a digital banking and brokerage app that offers loans, credit cards and investing services, face as they transition into mature financial services providers.A strong economy, lower interest rates and the company’s “success driving better scale and profitability… justifies shifting our investment thesis towards a more long-term view of what a mature SoFi looks like,” the brokerage said. “The stock’s valuation has become overstretched across a wide matrix of multiples.”Earnings per share forecasts for 2026 and the company’s long-term target for a 20%-30% return on tangible common equity (ROTCE) will be tough to achieve, the brokerage added.Shares were last trading at $14.53 and are heading towards a fourth consecutive session of losses, if current levels hold. As of last close, they had nearly doubled since October.The company trades at 69 times expected earnings for 2025, while the median for consumer digital lenders is 12.2 according to KBW.SoFi did not immediately respond to a request for comment. More

WASHINGTON (Reuters) -The number of Americans filing new applications for unemployment benefits dropped to an eight-month low last week, pointing to low layoffs at the end of 2024 and consistent with a healthy labor market.The report from the Labor Department on Thursday added to a recent raft of upbeat economic data, including consumer spending, in reinforcing the Federal Reserve’s projections for fewer interest rate cuts this year. Labor market resilience is keeping the economic expansion on track.”A stable job market will squelch the Fed’s appetite for cutting rates aggressively amid nagging services inflation,” said Jeffrey Roach, chief economist at LPL Financial (NASDAQ:LPLA).Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 211,000 for the week ended Dec. 28, the lowest level since April. Economists polled by Reuters had forecast 222,000 claims for the latest week. There were sharp declines in unadjusted claims in California and Texas. Large increases in filings were recorded in Michigan, New Jersey, Pennsylvania, Ohio, Massachusetts and Connecticut.Claims tend to be volatile around the end of the year. Through the volatility, however, they have remained compatible with a labor market that is steadily slowing at a pace that does not signal a deterioration in economic conditions.The four-week moving average of claims, which strips out seasonal fluctuations from the data, fell 3,500 to 223,250. The dollar rose to a two-year high against a basket of currencies, while stocks on Wall Street were slightly stronger. Yields on longer-dated U.S. Treasuries edged higher.CONSTRUCTION SPENDING UNCHANGED     The U.S. central bank last month delivered a third consecutive interest rate cut, lowering its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range. It, however, projected only two reductions in borrowing costs this year compared to the four it had forecast in September, acknowledging the resilience of the jobs market and economy. The Fed’s policy rate was hiked by 5.25 percentage points in 2022 and 2023 to quell inflation.The labor market is being underpinned by very low levels of layoffs, but employers are hesitant to add more workers after a hiring spree during the recovery from the COVID-19 pandemic. As a result, some workers who have lost their jobs are experiencing long bouts of joblessness, with the median duration of unemployment approaching a three-year high in November. The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 52,000 to a seasonally adjusted 1.844 million during the week ending Dec. 21, the claims report showed. The so-called continuing claims continued to rise in Washington state, long after a strike by factory workers at Boeing (NYSE:BA) ended. They remained elevated in North Carolina in the aftermath of the devastation caused by Hurricane Helene, and in Michigan and Ohio, which have suffered job losses in manufacturing.Economists have also attributed some of the continued elevation in the so-called continuing claims to difficulties stripping out seasonal fluctuations from the data. They expect the unemployment rate to have held steady at 4.2% in December.The government is scheduled to publish its closely watched employment report for December next Friday.”Businesses hired fewer employees in 2024 than they did in 2023 and 2022, leading to the persistent increase in continuing claims in 2024,” said Stuart Hoffman, senior economic advisor at PNC Financial (NYSE:PNC). “But the economy is still creating roughly enough jobs to keep up with labor force growth.” A separate report from the Commerce Department’s Census Bureau showed construction spending was unchanged in November as a moderate rise in single-family homebuilding was offset by a sharp decline in outlays on multi-family housing projects. That followed an upwardly revised 0.5% rise in October. Economists had forecast construction spending would gain 0.3% in November after a previously reported 0.4% rise in October. It increased 3.0% on a year-on-year basis in November.Spending on private construction projects edged up 0.1% after increasing 0.6% in October. Investment in residential construction nudged up 0.1%, with outlays on new single-family projects rising 0.3%.  New construction could be hampered by higher mortgage rates, President-elect Donald Trump’s threat to impose tariffs on imports, and the labor shortages that could result from his incoming administration’s broad promise to deport immigrants. Trump’s policy pledges, including tax cuts, have contributed to the elevation in mortgage rates even as the Fed has been lowering borrowing costs. Outlays on multi-family housing units fell 1.3% in November. Spending on home renovations continued to increase.Investment in private non-residential structures like offices and factories was unchanged in November. Spending on public construction projects dipped 0.1% in November after easing by the same margin in October. State and local government spending slipped 0.1%, while outlays on federal government projects dropped 0.5%. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe German conservative leader Friedrich Merz, who is in pole position to become the country’s next chancellor, has said the EU should make a fresh attempt at a sweeping free trade deal with the US once Donald Trump becomes president.“We need a positive agenda with the US, which would benefit both American and European consumers,” the Christian Democrat leader said in an interview with DPA news agency. “A new European-American joint free trade initiative could avert a dangerous tariff spiral.”It is unclear what kind of reaction Merz will get in Washington. Trump halted negotiations on the Transatlantic Trade and Investment Partnership (TTIP), a planned trade agreement between the EU and US, shortly after becoming president in 2017 and went on to impose tariffs on European imports.Merz was speaking less than two months before snap elections in Germany prompted by the collapse of Chancellor Olaf Scholz’s fragile three-party coalition in November. Polls suggest Merz’s centre-right CDU/CSU bloc is on course for victory.Ahead of Trump’s re-entry into the White House on January 20, Germans are becoming increasingly apprehensive about the potential negative impact of his so-called Maga (“make America great again”) policies on the Eurozone’s largest economy.In his first term Trump aggressively pursued an “America First” approach aimed at closing the US trade deficit and boosting homegrown production, which often entailed trade conflicts with some of the US’s closest allies. In a sign of turbulence to come, he warned last month that the US would impose tariffs on EU goods such as cars and machinery unless the bloc stepped up its purchases of US oil and gas. A study last year by the German Economic Institute in Cologne (IW) predicted the German economy would incur losses of up to €180bn over a second four-year Trump term as a result of a trade war between the US and Europe.It said German carmakers and machine-building companies would be particularly hard hit by Trump’s plans to raise import tariffs to 10 per cent or even 20 per cent. The US was Germany’s biggest trading partner in the first half of 2024.Speaking to DPA, Merz said he expected tougher conditions for European business when Trump becomes president. “It will be challenging,” he said. The EU should, Merz added, expect the US to focus on safeguarding its own interests, including by imposing high import tariffs. “But our response to that shouldn’t be to start with our own tariffs,” he said.Instead, the EU should concentrate on restoring its declining competitiveness, and then tell the Americans: “Yes, we are prepared to face this competition with you, too.” He added: “The right response is to react with innovation and good products.” Merz has pledged to improve the competitiveness of the German economy, which is stuck in its first two-year slump since the early 2000s, if he becomes chancellor.In its manifesto the CDU/CSU says it will reduce corporate taxation to 25 per cent from about 30 per cent currently, cut social security contributions, halve electricity network charges for industrial customers and slash bureaucracy.Other parties, such as Scholz’s Social Democrats, and some economists have warned that many of Merz’s proposals are unfunded.Merz said Germany must reduce corporate tax rates and become a more attractive place to do business in order to better compete with the US, where tax credits provided under President Joe Biden’s Inflation Reduction Act have prompted many German companies to consider moving production to the US.He said Germany’s non-wage labour costs such as social security payments were also too high. “You can’t resolve that on a European level, you have to do it on a national basis.” Indeed, the country’s non-wage labour costs are now at their highest level ever, according to figures released on Thursday, thanks to an increase in contributions to medical insurance, which came into effect at the start of the year. Some 42.3 per cent of gross wages go towards medical, social and unemployment insurance, according to calculations by the Augsburger Allgemeine newspaper. More