Stock markets tanked on Friday, and interest rates dropped – Stock markets had their worst day since President Trump announced his tariff plan in April, after he announced an additional 100% tariff on all imports from China. This was in response to China’s announcement that it would limit the exports of raw materials. The Dow, which has seen a great rise in recent weeks and was near its all-time high, dropped 879 points, a 1.9% one-day loss. The S&P fell 2.7% and the tech-heavy Nasdaq fell 3.6% on Friday. It was a dreadful day for investors, but it’s completely possible that another deal will be worked out with China by Trump’s November 1st deadline, and the additional 100% tariffs will never take place. On the positive side, when investors sell stocks, they often flock to the safety of U.S. Treasury bonds. They did, and bond yields hit their lowest levels of the year. This drove down mortgage rates on Friday to their lowest levels since last September as well.
Government shutdown – The government shutdown will enter its third week next week. Hopefully, we will see a deal to reopen the government soon. For some reason, this has not affected stock prices and interest rates. While many government employees have been furloughed, the administration called the Bureau of Statistics employees back to work so that they could tabulate the September CPI numbers and release them on October 15. That was a welcome surprise to investors after last week’s jobs report was not released due to the shutdown. All eyes are on the labor market and the inflation rate because the Fed’s mandate is to control inflation and maintain full employment. With the unemployment rate rising, last month they made their first interest rate cut of the year. The rate of inflation that peaked at 9.1% in June of 2022 had worked its way down to 2.3% in April, but has risen steadily since tariffs were increased and had risen to 2.9% in August. The Fed felt that addressing the deteriorating labor market was more important at this time than controlling inflation. The Fed has another meeting on the 28th and 29th of October. Knowing the unemployment rate and the inflation rate will give investors insight into whether the Fed will cut interest rates again at the October meeting.
Stock Markets – The Dow Jones Industrial Average closed the week at 45,478.60, down 2.7% from 46,758.28 last week. Year-to-date, it is up 2.8% from 44,544.66 on December 31, 2024. The S&P 500 closed the week at 6,552.51, down 2.4% from 6,715.79 last week. Year-to-date, the S&P is up 8.5% from 6,040.53 on December 31, 2024. The Nasdaq closed the week at 22,204.43, down 3.5% from 22,780.51 last week. Year-to-date, it is up 13.1% from 19,627.44 on December 31, 2024.
U.S. Treasury bond yields – The 10-year Treasury bond closed the week yielding 4.05%, down from 4.13% last week. The 30-year treasury bond yield ended the week at 4.63% down from 4.71% 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 9, 2025, were as follows: The 30-year fixed mortgage rate was 6.3%, down from 6.34% last week. The 15-year fixed was 5.53%, nearly unchanged from 5.55% last week. The 30-year was closer to 6% at the end of the day on Friday. We would not be surprised to see the stock market correct and mortgage rates rise on Monday. It just seems like the giant one-day drop in stocks and interest rates was an overreaction.
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.