Economic news this week centered around the election and the Fed. When word spread that President Trump had won the election the stock market surged on expectations of less regulation and lower corporate tax rates than had Vice President Harris won. The Dow gained over 1,200 points on Wednesday after Trump was declared the winner. Bond yields spiked as investors feared that tariffs would increase prices for imports and that fewer undocumented immigrants would raise labor prices, both of which could reignite inflation. For example, the 10-year treasury bond yield was 4.26% on election day, Tuesday, and jumped to 4.42% on Wednesday. Fortunately, on Thursday Fed Chairman, Powell announced that the Fed was dropping their benchmark rates by ¼% and stated a possibility of another drop in December as well as further drops in 2025. When asked if he anticipated the possibility of rate increases next year at a press conference, he said that he could not rule out anything but anticipates further drops not increases as the Fed brings rates to a less restrictive level. Both his statements and the digesting of the election results had investors feeling that the sharp rise in bond yields was an overaction and the 10-year ended the week at 4.30%, down from last Friday and just slightly higher than on election day. Next week we will get some important inflation news. The Consumer Price Index will be released by the government on Wednesday and the Producer Price Index will be released on Thursday. Should those indicate that inflation is still moderating it will be good for mortgage rates and bond yields.
Stock markets – Stock market indexes closed the week at record highs –Expectations of less regulation and lower corporate tax rates drove stocks to record highs in their best week of the year. The Dow Jones Industrial Average closed the week at 43,988.89, down 4.6% from 42,052.19 last week. It is up 16.7% year-to-date. The S&P 500 closed the week at 5,995.54, up 4.8% from 5,718.80 last week. The S&P is up 25.7% year-to-date. The Nasdaq closed the week at 19,289.78, up 5.8 % from 18,239.92 last week. It is up 28.5% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 4.30%, down from 4.37% last week. The 30-year treasury bond yield ended the week at 4.47%, down from 4.51% 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 October 31, 2024, were as follows: The 30-year fixed mortgage rate was 6.79%, up from 6.72% last week. The 15-year fixed was 6.00%, unchanged from 5.99% 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.
Have a great weekend!