Stock markets down for third straight week – A steep drop in oil prices and a jump in the value of the dollar caused another sell off of stocks this week. Investors already fearful of future interest rate hikes’ affects on corporate profits got more bad news this week. Falling oil prices caused energy company shares to fall. Oil prices hit a 5 year low on Friday. With the U.S. Central bank believed to be on the verge of raising interest rates and The European Central Bank driving down interest rates the U.S. Dollar has surged in value. This makes imported goods cheaper at home, but makes U.S. made goods (exports) more expensive overseas. A high dollar causes a fear that exports may suffer weakening U.S. manufacturers. The Dow Jones Industrial Average closed the week at 17,749.31, down from 17,856.78 last Friday, and well below 18,132.70 at the end of February, two weeks ago. The S&P 500 closed at 2,053.40, down from 2.071.26 last Week. It was 2,104.50 at the end of February. The NASDAQ also fell, it closed at 4,871.76, down from last week’s 4,927.37. It was 4,963.53 at the end of February. It was up over 5,000 for the first time since the tech bubble in 2000 at one point in the first week of March.
Treasury Bond yields settle this week after large increases over the last few weeks – The 10 year Treasury bond closed the week at 2.13%, down from 2.25% last week. The 10 year was 1.68% on January 30. The 30 year treasury yield ended the week at 2.70%, down from 2.84% last Friday.
Mortgage Rates – The 30 year fixed rates are around 4% for loans up to $417,000. They are about 4.25% for loans over $417,000. 15 year fixed loans are about 3.2% for loans up to $417,000 and about 3.5% for higher loan amounts. The Freddie Mac Primary Mortgage Survey which comes out early in the week reported that the 30 year fixed mortgage rate average for the week was 3.86% which was higher than last week’s 3.75%. The 15 year fixed was 3.10%which was also higher than last week’s 3.03%.
Oil prices closed Friday at a 5 year low – The stock markets sold off again Friday partially due to a steep drop in oil prices. Low oil prices make U.S. oil production difficult as the cost to extract oil exceeds the price per barrel, according to oil companies. Many states which depend heavily on oil production have seen their economies begin to slow, as oil producers cut back on production. Energy stocks have also dropped. The United States announced on Friday that they were purchasing 5 billion barrels of oil to add to the Strategic Petroleum Reserve. This purchase is estimated to be $224 million at Friday’s closing price of $44.84 per barrel.
Wholesale prices in U.S fall for 4th straight month – The Producer Price Index dropped 0.5% in February. A decline in food prices offset an increase in gasoline prices (which reversed this week). This shows that there is basically no inflation. The Federal Reserve is trying to maintain a 2% annual inflation level. Although inflation remains tame, it is thought that because of strong job growth the Federal Reserve is poised to raise interest rates. Low inflation usually would keep the Fed from raising rates.
Consumer confidence slips in March – The University of Michigan Survey on Consumer Sentiment showed that consumer confidence slipped in March for the 2nd straight month. It measured 91.2, down from 95.5 in February. In January the reading of 98.1 was the highest January level since January of 2000. Consumer confidence is still much higher than last year. It ranged from 81 to 83 from May to July 2014. Weather may have played some part in the drop.
Upcoming Federal Open Market Committee meeting – On March 18, at 2 PM Federal Reserve Chairperson, Janet Yellenwill make a statement on the Federal Open Market Committee’s stance on interest rates. While it is not believed that any increase in rates would be made before the June meeting the language in the statement is expected to potentially move the market.
Have a great weekend!
If you’d like more information on the San Fernando Valley or Los Angeles, or to have help looking for your next home, please feel free to reach out! I’m happy to help, no obligation.