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Stock markets almost unchanged this week

After four weeks of solid gains, stocks held steady in a holiday-shortened week. Stocks were down until Friday when they rallied as news of a deal to end the government shutdown was imminent.

The strength of the stock market lies in investors’ confidence in strong employment and corporate earnings. Last week, initial unemployment claims dropped below 200,000 for the first time since 1969. With about two-thirds of the economy fueled by consumer spending, a decades-low unemployment rate and higher wages are a positive sign.

About 25% of companies have reported fourth-quarter earnings. Profits are up about 13%. Analysts expect profits to rise 6% in 2019, down from double-digit gains in 2018. Considering that 2018 profits were boosted by the corporate tax cut that was not in effect in 2017, a 6% increase was considered a healthy number. Stock markets have now made up about 13% of their losses from their lows on December 24. The Dow has gained 2,900 points since December 24.

Weakness in the market includes investors’ fears of increased and prolonged tariffs and a trade war with China. President Trump and China agreed to take a “pause” while they try to negotiate a deal in late December. That has had a positive effect and has fueled a rebound in US stock markets.

Economic growth overseas also has investors cautious. China’s economic growth has slowed to the lowest levels since their expansion began in 1990. Europe has shown signs of slowing in their economies. The UK is also facing both economic and political uncertainty as they struggle to leave the European Union. 

The Dow Jones Industrial Average closed the week at 24,737.20 up 0.1% from 24,706.35 last week. It’s up 6% in January. 

The S&P 500 closed the week at 2,664.76, down 0.2% from 2,670.71 last week. It is up 6.3% in January. 

The NASDAQ closed the week at 7,164.86, up 0.1% from 7,157.23 last week. The NASDAQ is up 8% this month. 

Treasury bond yields are almost unchanged this week. The 10-year treasury bond closed the week yielding 2.76%, down slightly from 2.79% last week. The 30-year treasury bond yield ended the week at 3.06%, slightly down from 3.09%  last week. We watch treasury bond yields because mortgage rates follow bond yields. 

Mortgage rates are unchanged this week. Rates are at the lowest levels in 9 months.

The January 24, 2019, Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.45%, unchanged from 4.45% last week. The 15-year fixed was 3.88%, unchanged from 3.88% last week. The 5-year ARM was 3.90%, up slightly from 3.87% last week. 

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