The coronavirus outbreak in China continued to grip the financial markets this week. The total affected and number of deaths rose sharply throughout the week suggesting the virus is not yet contained.

Stocks hate uncertainty and bonds love uncertainty. As a result, bonds traded higher to their best levels since October, pushing home loan rates lower to the best levels in three years.

It wasn’t all bad news this week though as economic readings here in the U.S. continue to show that our economy remains strong.

We also had a Fed meeting where the Fed left rates unchanged and did say the U.S. economy remains in a good place. Fed Chairman Powell also said the impact of the coronavirus on the global economy remains uncertain.

Over on Wall Street, corporate earnings overall have been very positive with Apple doing much better than expectations.

Bottom line: home loan rates will continue to be supported by the coronavirus uncertainty until they aren’t – meaning, the present quick decline in rates the past two weeks may prove fleeting should the coronavirus outbreak become more contained and less uncertain.

Forecast for the Week

Job creation data will be in the spotlight in the upcoming week with two key reports on the radar.

The ADP Private Payrolls Report and the government’s Jobs Report, both for January, will be front and center and will be closely monitored by both the Federal Reserve as well as the investing community.

Earnings season will continue next week. However, the bulk of the reports are behind us.

The markets will also continue to be gripped in the coronavirus headlines with the financial implications still uncertain in these early stages. There could be a slowdown in China’s economy if the virus is not contained within a decent amount of time. How this story goes will determine how global stock markets, bonds, and home loan rates perform.

Reports to watch:

  • The ISM Manufacturing Index will be released on Monday followed by the ISM Service Index on Friday.
  • Labor market data will come from Wednesday’s ADP Private Payrolls with the government’s Jobs Report on Friday which includes Non-Farm Payrolls, the Unemployment Rate, and Hourly Earnings.

Source: Vantage

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