10/02/2022
Economic update for the week ending October 1, 2022
Stock markets suffered the third week of steep losses - High inflation and a determined Federal Reserve has led to the highest percentage increases in interest rates in history. They are higher in percentage increase than in 1980 while not so in number. This has led to steep stock losses this year, and investors seem to be in a panic. September marked the worst month for stocks since the announcement of the COVID shutdowns in March of 2020, the dot.com bust in 2002, and The Great Recession in 2008. At the same time, the job market is robust. Unemployment is near record lows. There are more than two jobs for every available worker looking for a job. With little fear of being unemployed, people are still spending, adding to inflationary pressure.
The Dow Jones Industrial Average closed the week at 28,725.51, down 3% from 29,590.41 last week. It is down 21.0% year-to-date.
The S&P 500 closed the week at 3,585.62, down 2.9% from 3,693.23 last week. The S&P is down 23.6% year-to-date.
The NASDAQ closed the week at 10,575.62, down 2.7% from 10,867.94 last week. It is down 32.4% year-to-date.
U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 3.69%, up from 3.69% last week. The 30-year treasury bond yield ended the week at 3.61%, up from 3.61% 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 for the most popular loan products as of September 29, 2022, were as follows:
The 30-year fixed mortgage rate was 6.70%, up from 6.29% last week.
The 15-year fixed was 5.96%, up from 5.44% last week.
The 5-year ARM was 5.30%, up from 4.97% last week. Rates were higher at the end of the week.
Economic update for the month ending September 30, 2020
Stock markets suffered worst monthly losses since announcement of the pandemic shutdowns - September marked the worst month for the Dow since March of 2020, when the COVID shutdowns were announced. The S&P had its worst September since the 2002 dot.com bust and is on track for its worst yearly loss since The Great Recession in 2008. The Nasdaq is already down more than 30% for the year. With inflation not showing signs of retreating and a Fed that has indicated that they will continue to raise interest rates to cool the economy and curb inflation, investors have begun to panic. Interest rates shot up further in September. The pace of rate hikes, while not as large in number as in the 1980s, has been the highest in percentage increase in history. At the same time, the jobs market is robust. Unemployment is near historic low levels. There are more than two jobs for every applicant. With little fear of becoming unemployed, people are out spending which is fueling inflation.
The Dow Jones Industrial Average closed the month at 28,725.51, down 8.2% from 31,510.43 on June 30. It's down 21% year-to-date.
The S&P 500 closed the month at 3,585.62, down 9.4% from 3,955.29 last month. The S&P is down 23.6% year-to-date.
The NASDAQ closed the month at 10,575.62, down 10.5% from 11,816.20 last month. It is down 32.4 year-to-date.
U.S. Treasury bond yields - The 10-year treasury bond closed the month yielding 3.83%, up from 3.15% last month. The 30-year treasury bond yield ended the month at 3.75%, up from 3.27% last month. 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 September 29, 2022 for the most popular loan products were as follows: The 30-year fixed mortgage rate was 6.70%, up from 5.66% at the end of July. The 15-year fixed was 5.96%, up from 4.98% last month. The 5-year ARM was 5.30%, up from 4.51% last month.
The September jobs report will be released next Friday. That will be a good indicator of whether the fed rate hikes are causing employers to slow the pace of hiring. So far that has not happened. With unemployment near a 50-year low, wages are increasing due to a labor shortage. There are over two job openings for every person looking for a job. The tight labor market is one of the conditions that is fueling inflation.
U.S. existing-home sales - The National Association of Realtors reported that existing-home sales totaled 4.80 million units on a seasonally adjusted annualized rate in August, down 0.4% month-over-month from the annualized sales in July. Year-over-year sales were down 19.9% from an annualized rate of 5.99 million in August 2021. The median price for a home in the U.S. in August was $389,950, up 7.7% from $361,500 one year ago. Month-over-month the median price dropped in July and August from the all-time high of $413,800 in June. August marked a record 126 consecutive months of year-over-year increases in the median price. There was a 3.2-month supply of homes for sale in August, up from a 2.6-month supply last August. First-time buyersaccounted for 29% of all sales. Investors and second-home purchases accounted for 16% of all sales. All-cash purchases accounted for 24% of all sales. Foreclosure and short sales accounted for less than 1% of all sales, remaining at a historic low.
California existing-home sales - The California Association of Realtors reported that existing- home sales totaled 313,540 on a seasonally adjusted annualized basis in August, down 24.4% from August 2021, when 414,860 homes sold on an annualized basis. Pending sales jumped 16.6% month-over-month in August, so there will be more closings in September. Year-to-date existing-home sales are down 14.9%. The statewide median price paid for a home in August was $839,460, up 1.4% from $827,940 in August 2021. There was a 2.9-month supply of homes for sale in August, down from a 3.2-month supply of homes for sale in July and up from a 1.9-month supply one year ago. Interest rates rose dramatically in September. Pending home sales (new contracts) have slowed. The California Association of Realtors will not release pending sales figures for September until mid-October, but they will be down.
Have a great weekend friends!
