Economic update for the week ending July 2, 2022


Stock markets dropped this week –Stocks could not hold onto last week’s rally which followed six straight weeks of steep losses. The first half of 2022 was the worst first half of the year in over 50 years for stock markets. The bright spot this week is that mortgage rates and bond yields tumbled off their highs earlier in the month as investors feel that the slowing economy will likely tame inflation. For example, the 10-year Treasury bond closed the week at 2.88%, down from 3.49% on June 14. Mortgage rates that hit nearly 6% ten days ago are now in the mid to low 5% range. There is little good news for stocks. Low consumer confidence, a slowing economy, and a strong dollar all add up to fewer sales and lower corporate profits.

  • The Dow Jones Industrial Average closed the week at 31,097.26 down 1.3.% from 31,500.68 last week. It is down 14.4% year-to-date.

  • The S&P 500 closed the week at 3,825.33, down 2.2%from 3,911.74 last week. The S&P is down 20.0% year-to-date.

  • The NASDAQ closed the week at 11,127.85, down 4.1% from 11,606.62 last week. It is down 29.9% year-to-date.

U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 2.88%, down from 3.13% last week. The 30-year treasury bond yield ended the week at 3.11%, down from 3.26% last week. We watch bond yields because mortgage rates often follow treasury bond yields.

Mortgage rates – The Freddie Mac Primary Mortgage Survey reported that mortgage rates as of June 30, 2022, for the most popular loan products were as follows:

  • The 30-year fixed mortgage rate was 5.70%, down from 5.81% last week.

  • The 15-year fixed was 4.83%, down from 4.92% last week.

  • The 5-year ARM was 4.50%, up from 4.41% last week. Rates were lower Friday. The 30-year was under 5.5%. Next week’s survey rates should be lower again next week.

Jobs – The June jobs report will be released on Friday July 8, 2022. It will be interesting to see how the tightening measures taken by the Federal Reserve has affected the number of new jobs, the unemployment rate, and wage gains. As of the last jobs report in May the job market has been robust, unemployment is at historic low levels, and wages are increasing beyond the target set by the Fed to control inflation.


Economic update for the month ending June 30, 2022

Stock markets slid in June – Stock markets closed the first half of 2022 with their largest losses in 50-years – June was a tumultuous month for the stock markets. Stocks, bond yields, and mortgage rates stabilized in May. That was because economic data showed inflation moderating in April. For example, the CPI in March was 8.5%, the highest rate since 1982. In April the CPI dropped to 8.3% leaving investors feeling that rate hikes and other tightening measures the Fed enacted were working. In the second week of June May’s CPI reading of 8.6%, the highest rate of inflation since 1981, was released. Stocks immediately began to sink and treasury bond yields and mortgage rates rose, as the economy had not slowed in a way to tame inflation as previously hoped. In a response to the May CPI report the Federal Reserve increased its key rates by .75%, the highest single meeting increase in decades. Consumer confidence also slipped to the lowest level in forty years as consumers are feeling the impact of higher prices. The June CPI report will be released on July 13. Other data over the last week of June points to some moderating of inflation. If that data turns out to be correct stocks may recover some of their losses. Bond yields and mortgage rates dropped significantly in the final days of the month based on expectations that a slowing economy will tamper information. If the CPI stays at 8.6% or increases we would expect stocks to fall further and bond yields and mortgage rates to increase.

  • The Dow Jones Industrial Average closed the month at 30,776.43, down 6.7% from 32,990.12 on May 30. It’s down 15.3% year-to-date. That is the worst performance for the Dow for the first half of a year since 1962.

  • The S&P 500 closed the month at 3,785.39, down 8.4% from 4,132.15 last month. The S&P is down 20.6% year-to-date. This marked the worst performance for the S&P over the first half of a year since 1970.

  • The NASDAQ closed the month at 11,028.74, down 8.3% from 12,081.39 last month. It is down 29.5%, year-to-date. It was the worst first half of a year ever for the NASDAQ.

U.S. Treasury bond yields - The 10-year treasury bond closed the month yielding 2.98%, up from 2.85% last month. The 30-year treasury bond yield ended the month at 3.14%, up from 3.07% last month. We watch bond yields because mortgage rates often follow treasury bond yields. Bond yields dropped sharply over the last week of the month. The 30-year peaked at 3.45%, and the ten-year hit 3.49% in the middle of June.


Mortgage rates – The Freddie Mac Primary Mortgage Survey reported that mortgage rates as of June 30, 2022 for the most popular loan products were as follows:

  • The 30-year fixed mortgage rate was 5.70%, up from 5.09% at the end of May.

  • The 15-year fixed was 4.83% up from 4.31% last month.

  • The 5-year ARM was 4.50%, up from 4.20% last month.

Rates dropped quite a bit on Wednesday and Thursday. Currently the 30-year is under 4.5%. Next week’s survey rates will be back down in that range.


The June jobs report will be released on Friday June 8. This is the May report.

The U.S. economy added 390,000 new jobs in May - The Department of Labor and Statistics reported that 390,000 new jobs were added in May. The unemployment rate held steady at 3.6%. The labor-force participation rate (the share of workers with a job or actively looking for a job) increased to 62.4% in May, up from 62.2% in April. It is well below the 63.6% level before the pandemic. Average hourly wages increased 5.2% from May 2021, down from a 5.5% year-over-year increase in April which is another sign that inflation may be moderating.

Home sales figures are released in the third week of the month for the previous month. These are May’s results.


U.S. existing-home sales - The National Association of Realtors reported that existing-home sales totaled 5.41 million units on a seasonally adjusted annualized rate in May, down 3.4% month-over-month from the annualized number of sales in April. Year-over-year sales were down 8.6% from the annualized rate of 5.92 million in May 2021. The median price of a home in the U.S. in April was $407,600, up 14.8% from $355,000 one year ago. May marked a record 123 consecutive month of year-over-year increases in the median price. Inventory levels increased 12.6% from April, but are still 4.1% below the number of homes for sale in May 2021. There was a 2.6-month supply of homes for sale in May, up slightly from a 2.5 month supply last May. First-time buyers accounted for 27% of all sales. Investors and second-home purchases accounted for 16% of all sales. All-cash purchases accounted for 25% of all sales. Foreclosure and short-sales accounted for less than 1% of all sales remaining at a historic low.


FHFA Home Price Index

According to the latest FHFA Home Price Index, house prices rose nationwide in April by +1.6% from the previous month, with prices up +18.8% YoY. The previously reported +1.5% price change in March 2022 was revised upward to +1.6% as well. For the nine census divisions, monthly changes ranged from +.3% in the East South Central to +2.5% in the West South Central division. The 12-month changes were all positive as well, ranging from +14.1% in the Middle Atlantic division to +23.5% in the South Atlantic division.


MBA Weekly Mortgage Applications

The MBA weekly mortgage applications index increased by +.7% for the week ending June 24th. Purchase applications rose by +.1% and were -24.0% lower than the same week a year ago. Refinance applications increased by +2.0% and were -80.0% lower vs. the same week last year. "Mortgage rates continue to experience large swings. After increasing 65 basis points during the past three weeks, the 30-year fixed rate declined 14 basis points last week to 5.84 percent. Rates are still significantly higher than they were a year ago, when the 30-year fixed rate was at 3.2 percent," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The decline in mortgage rates led to a slight increase in refinancing, driven by an uptick in conventional loans. However, refinances are still 80 percent lower than a year ago and over 60 percent below the historical average." Added Kan, "Overall purchase activity has weakened in recent months due to the quick jump in mortgage rates, high home prices, and growing economic uncertainty. Purchase applications were essentially flat last week but were supported by a 6 percent increase in government loan applications. The average purchase loan amount declined to $413,500, which highlights an ongoing downward trend seen since it hit a record $460,000 in March 2022."


Consumer Confidence

The Conference Board's Consumer Confidence fell to 98.7 in June. This is now the lowest reading since February 2021, when the index was 95.2. The present situation index declined to 147.1 from 147.4, while the expectations index dropped from 73.7 to 66.4. According to The Conference Board, the Expectations Index falling and stabilizing below 80 suggests weaker growth in the second half of the year and growing risks of recession by the end of the year. Intentions for purchases of cars, homes, and significant appliances have cooled significantly since the start of the year and continue to drop further as Fed 'aggressively raises interest rates.'

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