By: Fred Arnold
Despite the absence of major market moving news in the U.S., stocks have had a wild ride for the first 4 days of the week. The market volatility has been primarily based upon speculation about what the Fed will do regarding interest rates and economic concerns over seas. The market finished Thursday only down 100 points for the week after being down over 300 points at the start of Thursdays trading.
Mortgage rates have been continuing their march higher although the pace of the increase has slowed somewhat. On Thursday rates recovered slightly, however many investors continue to remain on pins and needles regarding the value of their bond portfolio. As rates rise, the value of bond holdings deteriorate. Despite the increase in rates investors seem to be waiting for what the Fed will do next.
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Next week the Fed holds their Open Market Committee meeting and will release a statement on Wednesday at 2:00 p.m.. In addition, the Fed will also be releasing their forecast for the future of the economy and rates. This meeting can be a game changer for the markets. For the last few week interest rate increases have been fueled by speculation that the Fed will start slowing its stimulus program in the coming months. The reduction of Fed involvement in the bond market will cause rates to rise as the 85 billion dollars in monthly bond purchases is what has been keeping rates artificially low.
Many are expecting the Fed to give further indication on what they will be doing with the stimulus plan and many investors believe that the Fed will have stronger language indicating they are even closer to reducing the stimulus program. Despite this feeling many investors continue to sit and wait for the release of the statement on Wednesday and hope that the indication of a reduction in the program is further off than rumored. One thing is for sure, any language from the Fed that indicates they are closer to slowing or exiting the stimulus program will cause a significant jump in interest rates.
The good news in real estate for the week is that despite rising mortgage rates, applications for both purchase and refinances increased 5% in the prior week. Many believe that homeowners and home buyers are finally accepting that mortgage rates are not going back down to historic lows and that they better take action now before rates jump further.
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Indications are that the job market is continuing to slightly improve. This week’s report for first time jobless claims declined by 12,000 to 334,000. As we get closer to the 300,000 mark employment optimism always seems to grow. Claims are down for the last 3 out of 4 weeks.
Retail sales report showed an increase of .3% for the month of April. Even when volatile gas prices are removed from the equation the increase remained at .3%. Analysts were expecting only an increase of .1%
Many market moving economic reports are on tap for next week:
- Tuesday June 18th 2013 Consumer Price Index and Housing Starts
- Wednesday June 19th 2013 MBA Applications, FOMC Announcement & Forecasts
- Thursday June 20th 2013 Jobless Claims and Existing Home Sales
As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate. I welcome the opportunity to help you, your friends or neighbors. Please feel free to reach me at 661-505-4300.
Source: Santa Clarita News