| Tariffs dominated the news again this week – Over the weekend, the U.S. and China announced that progress has been made on a trade deal. Both countries agreed on a pause on the most restrictive tariffs and to significantly reduce the restrictive tariffs that they have put in place since April 2, so that they can work on future negotiations to finalize a more permanent tariff deal. Stocks soared on Monday and increased in value through the week. Major stock indexes ended the week down just slightly since the start of the year.
Inflation dropped to a 4-year low in April – The Consumer Price Index (CPI) for April was released this week. The annual inflation rate in April dropped to 2.3%, its lowest rate since February 2021. Core CPI, which excludes volatile components like food and energy rose 2.8% year-over-year. The Producer Price Index was also released. Producer prices (wholesale prices) dropped 0.5% month-over-month in April, their largest monthly decline since 2006. Year-over-year producer prices were up 2.4% in April. The graph below shows the trend of the Consumer Price Index since 2021.
Interest rates – Despite the lowest inflation in 4-years, mortgage rates and bond yields jumped this week. Usually when inflation drops interest rates drop as well. Unfortunately, economists are waiting to see how tariffs will affect future inflation. They believe that even with inflation trending toward acceptable levels, tariffs remain a wild card, and future spikes in inflation are likely. Stock markets – The Dow Jones Industrial Average closed the week at 42,645.74, up 3.4% from 41,249.38 last week. It is down 4.3% from 44,544.66 on December 31, 2024. The S&P 500 closed the week at 5,958.38, up 5.3% from 5,659.91 last week. The S&P is down 1.4% from 6,040.53 on December 31, 2024. The Nasdaq closed the week at 19,211.38, up 6.9% from 17,972.92 last week. It is down 2.1% from 19,627.44 on December 31, 2024. U.S. Treasury bond yields increased for the third straight week on tariff fears – The 10-year treasury bond closed the week yielding 4.43%, up from 4.37% last week. The 30-year treasury bond yield ended the week at 4.89%, up from 4.83% last week. We watch bond yields because mortgage rates follow bond yields. Mortgage rates jumped this week – 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 May 15, 2025, were as follows: The 30-year fixed mortgage rate was 6.81%, up from 6.76% last week. The 15-year fixed was 5.92%, up from 5.89% last week. The graph below shows the trajectory of mortgage rates over the past year.
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