Stock markets had an incredible week - Stock markets ended the week higher despite a .75% rate hike by the Fed and a second quarterly decline in GDP. The Fed hiked its key interest rates by .75% on Wednesday. Some investors feared a full one percent rise after the strong jobs report for June and the CPI increase of 9.1% announced earlier in the month. Fed Chairman Powell also issued remarks that led investors to believe that future rate hikes will be smaller and less often. He stated that the Fed has moved from accommodative to neutral interest rate levels. This tightening has been at the quickest pace ever. The Federal Funds rate is now 2.25%-2.5%, up from 0%-.25% in February. The rate was 1.50%-1.75% before the pandemic and dropped to 0%-25% when the shutdowns were announced. You have to take the quickest pace with a grain of salt due to the drastic drop to near zero percent at the start of the pandemic that lasted almost two years. The second quarter Gross Domestic Product (GDP) dropped 0.9%, its second consecutive quarter of contraction. This also supported that interest rate hikes were working to slow the economy to combat inflation. Oil prices also dropped 6.9% in July. Second quarter corporate profits also came in strong with 72% of companies exceeding expectations. Energy companies reported record profits. Amazon, Microsoft, and Apple also reported stellar profits. All in all, July marked the strongest July in years and the strongest July jump in the S&P since 1939. This followed the weakest June in decades.
The Dow Jones Industrial Average closed the week at 32,845.14, up 3% from 31,899.29 last week. It is down 9.6% year-to-date.
The S&P 500 closed the week at 4,130.29, up 4.3% from 3,961.64 last week. The S&P is down 13.3% year-to-date.
The NASDAQ closed the week at 12,390.69, up 4.7% from 11,834.11 last week. It is down 20.8% year-to-date.
U.S. Treasury bond yields higher this week - The 10-year treasury bond closed the week yielding 2.67%, down from 3.00% last week. The 30-year treasury bond yield ended the week at 3.0%, down from 3.10% 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 July 28, 2022, for the most popular loan products were as follows: The 30-year fixed mortgage rate was 5.30%, down from 5.54% last week. The 15-year fixed was 4.58%, down from 4.75% last week. The 5-year ARM was 4.29%, down from 4.31% last week.