Stock markets end week with an across the board sell off on Friday, due to interest rate fears – A robust, better than expected jobs reporthad the opposite effect that one would expect. Once the report was announced the markets began a step sell off. The Dow lost 278.94 for the day. At one point it was down over 300 points! The report caused fear that the Federal Reserve would soon begin to raise short term interest rates. Currently the Federal Funds and Discount Rate set by the Fed are near 0% and have been there since 2009. To combat the financial crisis of 2008 former Fed Chairman, Ben Bernanke, lowered the rate 14 times in 10 months. With the Federal Funds Rate at or near 0% for so longinvestors fear what rate hikes will do to corporate profits, as these hikes will drive up short term interest rates, which will make corporate debt more expensive. Long term rates also rose which will affect mortgages as well. It is always fearful when The Federal Reserve changes their stance on monetary policy. Everyone knows rate increases are coming, but nobody knows how soon and how quickly the Fed will raise rates. The last rate hike was in 2006. With inflation so tame it is widely believed that rates will not rise too much or too quickly, but nobody really knows for sure. The Dow Jones Industrial Average closed the week at 17,856.78 down from 18,132.70 last Friday.. The S&P 500 closed at 2.071.26this week, also down. It was 2,104.50 last Friday. The NASDAQ also fell, it closed at 4,927.37 which was just shy of last week’s 4,963.53. It was up over 5,000 for the first time since the tech bubble in 2000 at one point this week.
Treasury Bond yields are up sharply again this week – The 10 year Treasury bond closed the week at 2.25%, up .25% in one week from last week’s 2.00%. The 10 year was 1.68% on January 30. The 30 year treasury yield ended the week at 2.84% which was also up sharply from 2.50% last Friday. Rates soared after the release of the employment report on fears of a June rate hike by the Federal Reserve. Friday was the largest one day hike in rates since 2013 when the Fed announced that they were pulling back on the now ended bond and mortgage buying program known as Quantitative Easing 2 designed to bring down long term rates.
Mortgage Rates rose .25% yesterday – The 30 year fixed rates rose to 4% for loans up to $417,000 and well over 4.25% for loams over $417,000. It was the largest one day rise I can remember. The 15 year fixed rates also rose about ¼% yesterday. They are about 3.3% 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 3.75% below last week’s 3.80%. The 15 year fixed was 3.03% about the same as last week’s 3.07%. Next week’s rates will be significantly higher due to yesterday’s rise.
U.S. employers added 295,000 jobs in February- Unemployment Rate drops to a post- Great Recession low of 5.5%. – the Labor Department released the February Jobs Report Friday which showed that employers added 295,000 jobs. February marked the 12th straight month of job gains above 200,000. Hourly wages were up just 3 cents an hour after jumping 13 cents in January. Year over year hourly wages were up only 2% which tempered the report. The number of jobs were expected to be in the 230,000 range. Immediately after the report was released stocks plunged, and interest rates rose sharply as fears of a rate hike by the Federal Reserve rocked the investment world. The Federal Reserve has kept short term rates at or near 0% in order to improve the job market. 12 months of job gains above 200,000 is the longest job growth streak since 1994-1995. The unemployment rate dropped from 5.7% to 5.5%, its lowest level since May 2008.
California Employers added 421,200 new workers last year – Numbers released yesterday by the state show that the number of new jobs gained last year was 47% higher than the 320,300 new jobs that were previously reported. The revision boosted California’s job growth to 3.2% last year, well above the nation’s 2.3% for 2014. The report released on Friday also showed that California employers added 67,300 jobs in January. The state’s unemployment rate in January dropped to 6.9% in January from 7.1% the previous month.
Have a great weekend!
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