Stock markets dropped this week on inflation fears. Over the past two weeks, several reports indicated that inflation, which had been moderating steadily since peaking last June, was beginning to show signs of picking up. Friday's PCE (Personal Consumption Expenditures) report, a critical report the Fed relies upon to gauge inflation, came in much higher than expected. New home sales hit the highest number since last March. Retail sales dramatically increased, and unemployment hit its lowest level since January 1969. Investors who felt the Fed would soon stop their campaign of interest rate hikes just a month ago now think that the Fed will be forced to continue to increase rates for a more prolonged period to try to cool the economy. Since November this week, bond yields and mortgage rates have risen to their highest levels. The Dow Jones Industrial Average closed the week at 32,816.92, down 3% from 33,826.69 last week. It is down 1% year-to-date. The S&P 500 closed the week at 3,970.04, down 2.7% from 4,079.09 last week. It is up 3.4% year-to-date. The NASDAQ closed the week at 11,394.94, down 4.3% from 11,787.27 last week. It is up 8.9% year-to-date.
U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 3.93%, up from 3.82% last week. The 30-year treasury bond yield ended the week at 3.94%, up from 3.88% last week. We watch bond yields because mortgage rates follow bond yields.
Mortgage rates - The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of February 23, 2023, were as follows: The 30-year fixed mortgage rate was 6.50%, up from 6.32% last week. The 15-year fixed was 5.76%, up from 5.51% last week.
U.S. existing-home sales - The National Association of Realtors reported that existing-home sales totaled 4.0 million units on a seasonally adjusted annualized rate in January, down 0.7% month-over-month from the annualized number of sales in December. Year-over-year sales were down 36.9% from an annualized rate of 6.34 million last January. The median price for a home in the U.S. in January was $359,000, up 1.2% from $354,300 one year ago. January marked a record 131 consecutive months of year-over-year increases in the median price in the U.S. There was a 2.9-month supply of homes for sale in January, up from a 1.8-month pool last January. First-time buyers accounted for 31% of all sales. Investors and second-home purchases accounted for 16% of all sales. All-cash purchases accounted for 26% of all sales. Foreclosure and short sales accounted for less than 1% of all sales.