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Economic update for the week of March 26, 2022

Stock markets were higher again this week – Stocks continued to rise as investors came back into the market for the second consecutive week. This week marked the lowest weekly number of new jobless claims since 1969. Early indications point to strong first-quarter corporate profits. Stock markets that had hit correction levels just two and a half weeks ago are well above a 10% decline which is considered correction territory.

  • The Dow Jones Industrial Average closed the week at 34,861.24, up 0.3% from 34,754.93 last week. It is down 4.1% year-to-date.

  • The S&P 500 closed the week at 4,543.06, up 1.8% from 4,463.12 last week. The S&P is down 4.7% year-to-date.

  • The NASDAQ closed the week at 14,169.30, up 2.0% from 13,893.84 last week. It is down 9.4%, year-to-date.

U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 2.48%, up from 2.17% last week. The 30-year treasury bond yield ended the week at 2.60%, up from 2.42% last week. We watch bond yields because mortgage rates often follow treasury bond yields. Bond yields this week hit an inverted curve as the 3-year treasury actually pays a higher rate of interest than a 10-year. This inverted yield curve is a sign that investors feel inflation will be lower in ten years than it will be in the next three. In the past, this was an indicator of fears of recession which curbs consumer spending and reduces inflation. This is an unusual time where inflation has been exaggerated by supply shortages due to the pandemic, labor shortages, and energy prices which are up dramatically since the invasion of Ukraine. It is widely felt that inflation will moderate next year. The Fed expects inflation to drop in half, but even at that level inflation will remain higher than it has been over the past decade.

Mortgage rates – Home loan rates continued to spike this last week as inflation has hit the highest levels in forty years. March 24, 2022, Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products were as follows:

  • The 30-year fixed mortgage rate was 4.42%, up from 4.16% last week.

  • The 15-year fixed was 3.63%, up from 3.39% last week.

  • The 5-year ARM was 3.36%, up from 3.19% last week.

Initial Jobless Claims

Initial Jobless Claims fell -28k from 215k to 187k in the week ended March 19th, beating expectations for a 210k print, and marking the lowest level since September 1969. Continuing claims also fell more than anticipated, down -67k from 1.417mln to 1.35mln in the week ended March 12th. That was the lowest reading since the first week of 1970.

New Home Sales

New Home Sales for February declined by -2.0% to 772k annualized units vs. the prior downwardly revised print of 788k in January (orig. 801k). Looking YoY, new home sales in February are down by -6.2% from the 823k unit pace seen in 2022. New homes on the market at the end of February were 407k, up modestly from a prior 398k, and the most since August 2008. Combined with the decline in sales, this brought the month's supply up from 6.1 to 6.3, its highest since last October. The median price for a new home sold in February fell -6.3% to $400.6k, but that is still up by 10.7% when looking YoY. The average price, however, was higher by 3.4% to $511k, which is a large gain of 25.4% YoY. Broken out by region, the West fell by -13.0% on the month, the South was down -1.7%, the Midwest up 6.3%, and the Northeast up 59.3%.

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