Economic update for the week ending June 11, 2022

Stock markets suffered steep losses on heightened inflation fears this week – This week the May Consumer Price Index (CPI) report was released. It showed that consumer prices in May had increased 8.6% from one year ago. That was the highest reading in over forty years. It was widely felt that inflation was beginning to moderate because the CPI had decreased in April to 8.3%, down from 8.5% in March. Wages were not up as much in May as they were in April, and other core inflation indexes showed inflation was beginning to moderate. This new CPI report for May took investors by surprise as it revealed that inflation has not been tamed and that interest rate increases and other tightening measures by the Fed have not slowed inflation. Mortgage rates and bond yields which peaked in early May and had moderated over the last few weeks bounced back to their highest levels in over a decade. The Dow Jones Industrial Average closed the week at 31,292.79 down 4.9% from 32,899.70 last week. It is down 13.9% year-to-date. The S&P 500 closed the week at 3,900.86, down 5.1% from 4,108.54 last week. The S&P is down 18.2% year-to-date. The NASDAQ closed the week at 11,340.02, down 5.6% from 12,012.73 last week. It is down 27.5% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 3.15%, up from 2.96% last week. The 30-year treasury bond yield ended the week at 3.20%, up from 3.11% 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 June 9, 2022, for the most popular loan products were as follows: The 30-year fixed mortgage rate was 5.23%, up from 5.09% last week. The 15-year fixed was 4.38%, up from 4.32% last week. The 5-year ARM was 4.12%, up from 4.04% last week. Rates were higher on Thursday and Friday so next week’s survey will show higher rates.

Home sales data for May should be released by the California Association of Realtors at the end of next week. The National Association of Realtors will release data the following week. You can get local home sales numbers for any city or zip code in Southern California on my website now.