Economic Update | Week Ending January 13, 2024

Stock markets – With all eyes on the Fed and what they will do with interest rate policy, investors waited for two key inflation reports that were released this week. On Thursday, the December Consumer Price Index (CPI) was released. It shows that inflation heated up in December. Consumer prices increased 3.4% year-over-year, up from a 3.1% year-over-year increase in November. Core CPI, which excludes food and energy costs rose 3.9% from one year ago. On Friday, the Producer Price Index (PPI) was released. This is an index that measures wholesale prices. Wholesale prices unexpectedly fell in December, up just 1% from one year ago. Consumer prices typically trail behind and mirror changes in producer prices. When producers secure goods at lower costs, the benefits are often passed on to consumers. Consumer prices generally lag behind and follow producer prices. If producers can purchase goods at a lower price that gets passed on to consumers. Bond yields and mortgage rates, which have increased in the first ten days of the year following a strong jobs report and the uptick in CPI inflation dropped on Friday following the PPI report on hopes that inflation will keep moderating. The Dow Jones Industrial Average closed the week at 37,592.98, up 0.3% from 37,466.11 last week. It is down 0.2% year-to-date. The S&P 500 closed the week at 4,783.83, up 1.8% from 4,697.24 last week. The S&P is up 0.3% year-to-date. The Nasdaq closed the week at 14,927.76, up 2.8% from 14,524.07 last week. It is down 0.6% year-to-date.

Bond yields and mortgage rates, which have increased in the first ten days of the year following a strong jobs report and the uptick in CPI inflation, dropped on Friday following the PPI report on hopes that inflation will keep moderating. The Dow Jones Industrial Average closed the week at 37,592.98, up 0.3% from 37,466.11 last week. It is down 0.2% year-to-date. The S&P 500 closed the week at 4,783.83, up 1.8% from 4,697.24 last week. The S&P is up 0.3% year-to-date. The Nasdaq closed the week at 14,927.76, up 2.8% from 14,524.07 last week. It is down 0.6% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 3.96%, down from 4.05% last week. The 30-year treasury bond yield ended the week at 4.20%, unchanged from 4.21% last week. We watch bond yields because mortgage rates follow bond yields.

Mortgage rates – Every Thursday Freddie Mac publishes interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of January 11, 2024, were as follows: The 30-year fixed mortgage rate was 6.66%, up slightly from 6.62% last week. The 15-year fixed was 5.87%, down slightly from 5.89% last week.

The graph below shows the trajectory of mortgage rates over the past year.

Freddie Mac was chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing. Their mandate is to provide liquidity, stability, and affordability to the U.S

December home sales data for California and the U.S. will be released next week by the California Association of Realtors and the National Association of Realtors. You can get December data now for your city or zip code on our website, RodeoRe.com.

Have a great weekend!