Stock Markets lower – Stock markets closed lower this week on fears of higher short term interest rates. Investors felt confident that inflation was moderating after the October CPI showed consumer prices increase at their lowest pace since January. Even the Fed made statements that future rate increases may be more moderate. Stocks soared and long-term bond and mortgage rates dropped significantly since the CPI release in early November. This week several reports showed data that indicating inflation was not moderating as quickly as analysts expected, and stocks had their worst week since September. For example, the PPI report showed that wholesale prices grew 7.4% year-over-year, a 3% increase from last month. The November jobs report showed that 263,000 net new jobs were added and wages grew 5.1% year-over-year. Both figures were well above expectations. The November CPI report will be released on Tuesday, and the next Fed meeting is Wednesday. Investors expect another Fed rate increase and were expecting a 1/2% increase rather than the 3/4% increase that was announced at each of the last few Fed meetings. This new inflationary data has them concerned that the Fed may continue the aggressive pace of rate increases for longer than they expected last month. The Dow Jones Industrial Average closed the week at 33,476.46, down 2.8% from 34,428.95 last week. It is down 7.9% year-to-date. The S&P 500 closed the week at 3,934.38, down 3.4% from 4,071.63 last week. The S&P is down 17.5% year-to-date. The NASDAQ closed the week at 11,004.62, down 4% from 11,461.50 last week. It is down 29.7% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 3.57%, up slightly from 3.51% last week. The 30-year treasury bond yield ended the week at 3.56%, unchanged from 3.56% last week. We watch bond yields because mortgage rates often follow treasury bond yields.
Mortgage rates lower for the forth consecutive week – The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of December 8, 2022, were as follows: The 30-year fixed mortgage rate was 6.33%, down from 6.49% last week. The 15-year fixed was 5.67% down from 5.79% last week.