Stocks sold off Friday to end the week down sharply – After Federal Reserve Chairman Jerome Powell’s speech at the Fed’s annual symposium in Jackson Hole on Friday the Dow dropped more than 1,000 points, a 3% drop. The S&P dropped by 3.4%, and the Nasdaq dropped 3.9% In his speech he said that “there could be some pain for consumers and businesses” as the fed uses higher interest rates to fight inflation. He also said that there would be “forceful and rapid action on inflation”. He reiterated the desire to quickly attack inflation to bring it back to the Fed target range of 2% and that the tight jobs market is something they need to cool. He spoke about the need to get the unemployment rate higher to cool wage growth and consumer spending. The unemployment rate is currently at a 3.5%, a 50-year low. The August jobs report will be released next Friday. Investors had felt that rate hikes would moderate as there has been some signs of inflation moderating, but Powell’s speech made it clear that holding back was not what the Fed has in mind. It is possible that he used such an inflammatory message to frighten businesses, consumers and investors in hopes that they would all pull back on the rapid pace of hiring, spending, and investing that has added to overheating the economy fueling inflation. The Dow Jones Industrial Average closed the week at 32,283.49, down 4.2% from 33,706.44 last week. It is down 11.2% year-to-date. The S&P 500 closed the week at 4,057.66, down 4% from 4,228.48 last week. The S&P is down 14.9% year-to-date. The NASDAQ closed the week at 12,141.71, down 5.1% from 12,795.22 last week. It is down 22.4% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 3.04%, up from 2.98% last week. The 30-year treasury bond yield ended the week at 3.21%, almost unchanged from 3.22% last week. We watch bond yields because mortgage rates often follow treasury bond yields.
Mortgage rates – The Freddie Mac Primary Mortgage Survey reported that mortgage rates as of August 25, 2022, for the most popular loan products were as follows: The 30-year fixed mortgage rate was 5.55%, up from 5.13% last week. The 15-year fixed was 4.85%, up from 4.55% last week. The 5-year ARM was 4.36% down from 4.39% last week.
