Mortgage Market News for the week ending April 17, 2014

Last week, stocks posted large losses and mortgage rates improved, as investors grew more concerned about the strength of the economy. The reverse took place this week. Better economic data and comments from Fed Chair Yellen boosted stocks and caused mortgage rates to end the week higher.

The economic data released this week was generally better than expected. The biggest report, March Retail Sales, rose 1.1% from February, which was the largest monthly increase since September 2012. Industrial Production, another important indicator of economic activity, showed a comparable increase. Weekly Jobless Claims held steady near the lowest levels since 2007. The Philly Fed manufacturing index jumped to the highest level since July of last year. Stronger growth is good for the economy, but it increases expectations for future inflation, which is negative for mortgage rates.

Dovish comments from Fed Chair Yellen on Wednesday suggested that the Fed is not in a rush to raise the fed funds rate. Yellen explained that the timing of rate hikes will depend on when the economy meets the Fed’s goals for the labor market and inflation. According to Yellen, a great deal of slack remains in the labor market, and this calls for accommodative monetary policy. Because loose policy boosts economic growth, Yellen’s comments were viewed as positive for the stock market, and investors shifted assets from bonds to stocks.

 

Average 30 yr fixed rate:
Last week:

-0.12

This week:

+0.08

 

Stocks (weekly):
Dow:

16,400

+400

NASDAQ:

4,100

+100