Dow Tops 18,000 Following the Fed meeting on December 17, the stock market has been in rally mode and reached another record high. The primary movement in mortgage rates this week took place after a strong GDP report. Mortgage rates ended the week just a little higher.
The stock market continued to climb over the past week, following the Fed’s guidance that it will be “patient” in raising the fed funds rate. The Dow broke above the 18,000 level for the first time on Tuesday. It was nice to see that the stock market rally had just a limited effect on mortgage rates. Often, investors shift assets out of bonds in order to buy stocks, and the reduced demand for bonds applies upward pressure on mortgage rates. This has not been the case in the current rally, however.
Third quarter Gross Domestic Product (GDP), the broadest measure of economic growth, was revised higher from 3.9% to 5.0%, far above the consensus of 4.3%. This was the fastest pace of quarterly growth since the third quarter of 2003. The unexpected strength came from key components such as business investment and consumer spending. This data was favorable for stocks, but due to concerns about future inflation, was not good for mortgage rates.
The housing market data released this week showed that the pace of activity slowed some in November. Existing Home Sales in November declined 6% from October, but they still were 2% higher than one year ago. Total inventory of existing homes available for sale fell to a 5.1-month supply, showing a slight issue in the supply of homes on the market.
The next big economic report will be the Employment data on January 9. Before that, Pending Home Sales will come out on December 31. The ISM National Manufacturing index will be released on January 2. During the holiday season, trading volume is much lighter than usual, meaning that significant price swings may be seen without any fresh news.
NOLA Lending Group
Company NMLS #488639
5601 Granite Parkway, Suite 720
Plano, TX 75024