This past week was a bit rough for the bond market as home loan rates steadily ticked higher and off the best levels in three years.
The coronavirus has been a tailwind to the bond market and home loan rates for the past few weeks, but this week the story seems to be less negative and less uncertain. As better news started to emerge in the coronavirus headlines, financial markets started paying attention back to the economic outlook or “future” of our economy.
The news has been solid across the board with better-than-expected readings in manufacturing, services, and jobs.
The end of the impeachment process also removed uncertainty and helped stocks focus on the good economic news at the expense of bonds and home loan rates.
Bottom line: while rates ticked up week over week, they remain within a whisker of the best levels in three years. If the coronavirus outbreak story becomes more positive, home loan rates could inch higher still, meaning now is a great time to refinance or purchase a home.
Forecast for the Week
With fears of the coronavirus easing and the chaos of the impeachment process behind us, the markets can now get back to what usually drives sentiment: economic data, consumer confidence and spending, inflation numbers, and monetary and trade policy.
The upcoming week will bring a key inflation report from the Consumer Price Index along with a gauge of consumer spending in the Retail Sales report. In addition, earnings season will continue, though most of the big-name companies have already reported. Of the 60% of S&P 500 companies that have reported earnings so far this season, 71% of them have beaten analyst expectations.
Fed Chair Powell will be on Capitol Hill on Tuesday and Wednesday testifying on the state of the U.S. in his Monetary Policy Report to Congress, originally called the Humphrey-Hawkins Testimony. We don’t foresee any glaring words from the Fed Chair, but we will be watching closely.
Reports to watch:
- Economic data is on the light side this week and kicks off on Thursday with Weekly Initial Jobless Claims that continue to hover near 50-year lows.
- On Friday, the Consumer Price Index, Retail Sales, and Consumer Sentiment will be released.