Well, that was an interesting week. No matter your candidate, I think we can all agree that at least we’re glad the ads have stopped airing. The election was definitely the big mover of the markets this week. Let’s jump right in.
MBA Mortgage Applications: In the week before the election, the 30-year fixed-rate rose two basis points to 3.77%. This caused applications for refinancing to fall 3.0%. An increase in purchase applications of 1.0% wasn’t enough to make up for this dip and the overall index was down 1.2%.
Jobless Claims: Initial jobless claims were down 11,000 to come in at 254,000. The four-week average did move up 1,750 claims to 259,750. Continuing claims did rise 18,000 to 2.041 million. However, the four-week average was down 2,250 to come in at 2.040 million.
Consumer Sentiment: Consumers were very positive on the direction of the economy going into the election as consumer sentiment was up more than four points to 91.6 in the midmonth reading for November. Expectations were up almost 6 points to 82.5. Consumers had more confidence in the jobs outlook. Current market conditions are up almost 3 points to 105.9 in a good indicator for consumer spending. Both the one-year and five-year inflation reading were up 0.3% to 2.7%.
Before I get into this, it’s important to note that mortgage rates are actually higher than what you’ll read in this article. The public data from Freddie Mac reflects market conditions before the election. Since the election of Donald Trump to the nation’s highest office, money has flooded back into the stock market for reasons we’ll detail a bit below.
When people think the stock market is going to go up for a while, they take the money they had in safer assets like bonds and reinvest it in the stock market. Because mortgages are most often packaged into bonds, it’s having a big effect on rates right now. The 10-year treasury yield, closely correlated with mortgage rates, was 25 basis points higher than its pre-election value last Wednesday. There’s lots of analysis about what’s happening in the bond market at the moment.
The bottom line is that mortgage rates are going up at the moment and we don’t know for how long. They’re still at very low levels compared to where they’ve been at other points in history, but if you’re looking to buy or refinance soon, locking your rate would be a good idea.
30-year fixed-rate mortgages (FRMs) averaged 3.57% with an average 0.5 point for the week ending November 10, 2016, up from last week when they averaged 3.54%. A year ago at this time, 30-year FRMs averaged 3.98%.
15-year FRMs this week averaged 2.88% with an average 0.5 point, up from last week when they averaged 2.84%. A year ago at this time, 15-year FRMs averaged 3.20%.
5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 2.88% this week with an average 0.4 point, up from last week when they averaged 2.87%. A year ago, 5-year ARMs averaged 3.03%.
The stock market was very volatile Tuesday night and the futures market was way down. The stock market had been operating on the assumption that Hillary Clinton was going to be our next president. The markets had prepared a lot of their investing positions as if that was going to be the case. As a result, futures took a beating Wednesday morning as people quickly re-evaluated their positions.
After heads cleared, the market had its best week since December 2011. Traders are thinking a Trump victory will mean more infrastructure spending and less regulation in the financial sector. This caused them to invest heavily in stocks.
The Dow Jones Industrial Average was up a whopping 5.36% on the week to finish at 18,847.66 after rising 39.78 points Friday. The S&P 500 was down 3.03 points to 2,164.45. On the week, it ended up 3.80% higher. The NASDAQ closed at 5,237.11, up 28.32 points on the day and 3.78% for the week.
The Week Ahead
Tuesday, November 15
Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.
Wednesday, November 16
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
Producer Price Index (PPI) (8:30 a.m. ET) – The Producer Price Index measures the average change over time in prices received by domestic producers for the sale of goods and services.
Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.
Housing Market Index (10:00 a.m. ET) – The National Association of Home Builders produces a housing market index based on a survey where respondents from the organization are asked to rate the general economy and housing market conditions. The index is a weighted average of separate diffusion indexes, including present sales of new homes, sales of new homes expected in the next six months and traffic of prospective buyers in new homes.
Thursday, November 17
Consumer Price Index (8:30 a.m. ET) – The consumer price index measures changes based on the price of a fixed basket of goods and services purchased by consumers.
Housing Starts (8:30 a.m. ET) – A housing start is registered when the construction of a new residential building begins. The start of construction is defined as the beginning of excavation of the foundation for the building.
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The four-week moving average of new claims smooths out weekly volatility.
Thankfully, election speculation is now over and we can get back to the glorious certainty that comes with hard numbers. It’s a beautiful thing. If what I just said sounds like the nerdiest thing you’ve ever heard, don’t worry. We’ve got plenty of home, money and lifestyle content to get your week off to the right start. Subscribe to the Zing Blog below.
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.