Economic update for the week ending July 16, 2022

Stock markets ended a volatile week slightly lower – Stocks dropped and interest rates jumped after the June CPI report was released on Wednesday. The Report shocked experts who had previously seen signs that inflation may have been moderating. To their surprise, the CPI report showed that consumer prices jumped from 8.6% in May to 9.1% in June, the highest reading since 1981. Mortgage interest rates, which had dropped about ½% from their peak on June 14, started to rise last Friday after the June jobs report showed that hiring had beat expectations by over 100,000 new jobs and continued to rise following the CPI report. The brisk rate of hiring, low unemployment, and soaring inflation disappointed investors who had hoped that interest rate hikes and other tightening measures would begin to cool the overheated economy and curb inflation. Due to inflation, good news is bad news, as the stronger the economy is the more people spend which causes inflation. On Friday, stocks surged on good news, which has not been the case lately, when it was announced that Retail Sales increased 1% month-over-month in June and rose 8.4% from one year ago. The report showed that consumers have not been swayed by negative economic predictions and are not cutting spending because they have a high amount of savings and their wages are rising. Early second quarter corporate profits have also beat expectations. The Fed reported that import prices fell slightly in June as the strong dollar and moderating oil prices may be helping inflationary pressures. Fed officials also made comments which dispelled investors’ fears of a full one percentage point interest rate hike at its next meeting. That does not seem to be their plan based on their comments. The Dow Jones Industrial Average closed the week at 31,288.26, down 0.2% from 31,338.15 last week. It is down 13.9% year-to-date.  The S&P 500 closed the week at 3,863.19, down 1.1% from 3,899.38 last week. The S&P is down 19.0% year-to-date. The NASDAQ closed the week at 11,452.42, down 1.6% from 11,635.31 last week. It is down 26.8% year-to-date.

U.S. Treasury bond yields higher this week – The 10-year treasury bond closed the week yielding 2.93%, down from 3.09% last week.  The 30-year treasury bond yield ended the week at 3.10%, down from 3.27% 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 July 14, 2022, for the most popular loan products were as follows: The 30-year fixed mortgage rate was 5.51%, up from 5.30% last week. The 15-year fixed was 4.67%, up from 4.45% last week. The 5-year ARM was 4.35%, up from 4.19% last week.

California home sales statistics for June will be released next week from the California Association of Real Estate. U.S. home sales will be released by the National Association of Real Estate the week of the 21st. You can get local sales statics for June on my website. You can search the market report tab for your city or zip code.

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