After plunging on Friday, June 24 and Monday, June 27 in response to Great Britain’s “Brexit” vote to leave the European Union, U.S. stocks strongly rebounded during the rest of the week. The updated table below shows how close the major stock market indexes are to fully recovering from the Brexit-induced market plunge.
Bond prices on the other hand, slipped slightly lower Monday through Wednesday before rallying higher on Thursday and Friday. The 10-year Treasury note yield briefly reaching a record low in premarket trading on Friday morning before rebounding in a move The Wall Street Journal ascribed to trader positioning around the new quarter and other technical factors. In economic news, the Commerce Department released several relevant reports during the week. The Department reported economic growth slowed in the first quarter, but not as abruptly as prior estimates suggested. GDP increased at a 1.1% annual rate in the first quarter rather than the 0.8% annual rate reported in May. First-quarter GDP growth has now been revised upward by 0.6% since the advance estimate was reported in April. The consensus forecast had called for first-quarter GDP growth of 1.0%. However, inflation is being held in check with the GDP Deflator declining to 0.4% from the prior reading of 0.6%. For the upcoming second-quarter GDP, the Atlanta Federal Reserve is currently estimating GDP rising at a 2.6% rate. The Commerce Department also released their Personal Income and Spending report for May showing Personal Spending moderated in May with a 0.4% increase after consumers increased spending by an upwardly revised 1.1% in April. The consensus forecast had called for 0.3% spending growth. Rising gasoline prices were partly responsible for the rise in spending. To fund their spending, consumers had to tap into their savings as take-home income didn’t rise as fast. Incomes increased by 0.2% in May, the smallest gain in three months and below the consensus forecast of 0.3%. When considering the effects of inflation, income grew by only 0.1%, the smallest increase in 14 months. Inflation as measured by the PCE Index increased 0.2% in May while the Core PCE Index that excludes volatile food and energy prices also increased by 0.2%. For the prior 12 months ended with May, inflation has increased only 0.9% and was lower than April’s annual rate of 1.1%. As far as the Fed is concerned, inflation is moving in the wrong direction and away from their 2% target. Furthermore, the Commerce Department reported Construction Spending fell 0.8% in May following a 2% decline in April which was the largest monthly setback in five years. The consecutive monthly declines in overall construction caught economists by surprise. Analysts had been looking for a rebound of 0.5% following the big drop in April. Overall spending on housing was flat with a 1.8% increase in apartment construction being offset by a 1.3% decline in single-family construction. Nonresidential construction was down 0.7% while government activity fell 2.3% to mark the third straight monthly decline. In housing, the S&P/Case Shiller 20-city Index showed annualized single-family home prices increased 5.4% in April, but were down slightly from March’s 5.5% annualized gain. The consensus forecast had been for a 5.5% rise. David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, stated "The home price increases reflect the low unemployment rate, low mortgage interest rates, and consumers' generally positive outlook. However, the outlook is not without a lot of uncertainty and some risk. Last week's vote by Great Britain to leave the European Union is the most recent political concern while the U.S. elections in the fall raise uncertainty and will distract home buyers and investors in the coming months.” The National Association of Realtors (NAR) reported fewer Americans signed contracts to buy homes in May resulting in home sales sliding lower year-over-year for the first time in nearly two years. The NAR’s seasonally adjusted Pending Home Sales Index fell 3.7% in May to 110.8, just below its May 2015 reading of 111. Although overall home sales have steadily improved over the past year, buyers are running into shrinking inventories that are causing homes to sell after fewer days on the market while pushing up prices and this may have reduced pending sales during May. May's decline implies completed home sales could slow in July or August as the number of listings fell 5.7% from a year ago suggesting prospective homebuyers have limited choices. Meanwhile, the median sales price has risen 4.7% over the past 12 months to $239,700.
As for mortgages, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending June 24
th showing the overall seasonally adjusted Market Composite Index fell 2.6%. The seasonally adjusted Purchase Index decreased 3.0%, while the Refinance Index decreased 2.0%. Overall, the refinance portion of mortgage activity increased to 58.1% of total applications from 57.7%. The adjustable-rate mortgage share of activity increased to 5.9% from 5.7% of total applications. According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased from 3.76% to 3.75%, the lowest level since May 2013. For the week, the FNMA 3.0% coupon bond gained 56.2 basis points to end at $103.83 while the 10-year Treasury yield fell 12.3 basis points to end at 1.456%. Stocks ended the week with the Dow Jones Industrial Average gaining 548.62 points to end at 17,949.37. The NASDAQ Composite Index added 154.59 points to close at 4,862.57, and the S&P 500 Index advanced 65.54 points to close at 2,102.95. Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 2.92%, the NASDAQ Composite Index has dropped 2.98%, and the S&P 500 Index has increased 2.81%. This past week, the national average 30-year mortgage rate fell to 3.40% from 3.49% while the 15-year mortgage rate decreased to 2.74% from 2.78%. The 5/1 ARM mortgage rate fell to 2.81% from 2.92%. FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates decreased to 3.47% from 3.57%.
Mortgage Rate Forecast with Chart For the week, the FNMA 30-year 3.0% coupon bond ($103.83, +56.2 basis points) traded within a narrower 59.3 basis point range between a weekly intraday high of $104.03 and a weekly intraday low of $103.44 before closing at $103.83 on Friday. The bond found some technical support on Wednesday at $103.47 before bouncing higher into a three-day holiday weekend to challenge resistance at the 0% Fibonacci retracement level at $104.00 on Friday. There are a couple of support levels found at “rising windows” or upward gaps at $103.47 and $103.20. The slow stochastic oscillator remains extremely “overbought” suggesting upward momentum is slowing as choppy intraday trading demonstrated during the week. Most of the coming week’s potentially market-moving economic news arrives on Thursday and Friday culminating in the Employment Situation Summary for June on Friday. It is likely this news will drive market action rather than technical factors. If the news is supportive for the bond market we could see some slight improvement in rates that are near historical lows. However, if the economic news triggers a further rally for the stock market, we could see bond prices fall and yields rise, and this would result in a slight worsening in mortgage rates.
Chart: FNMA 30-Year 3.0% Coupon Bond 
Economic Calendar - for the Week of July 4, 2016 The economic calendar features the minutes from the Federal Reserve’s FOMC meeting held on June 15 and the Employment Situation Summary for June. Economic reports having the greatest potential impact on the financial markets are highlighted in bold.
| Date | TimeET | Event /Report /Statistic | For | Market Expects | Prior |
| July 05 | 10:00 | Factory Orders | May | -0.9% | 1.9% |
| July 06 | 07:00 | MBA Mortgage Index | 07/02 | NA | -2.6% |
| July 06 | 08:30 | Balance of Trade | May | -$40.0B | -$37.4B |
| July 06 | 10:00 | ISM Services Index | June | 53.3 | 52.9 |
| July 06 | 14:00 | Minutes from FOMC Meeting | June 15 | NA | NA |
| July 07 | 07:30 | Challenger Job Cuts | June | NA | -26.5% |
| July 07 | 08:15 | ADP Employment Change | June | 152K | 173K |
| July 07 | 08:30 | Initial Jobless Claims | 07/02 | 268K | 268K |
| July 07 | 08:30 | Continuing Jobless Claims | 06/25 | NA | 2120K |
| July 07 | 11:00 | Crude Oil Inventories | 07/02 | NA | -4.053M |
| July 08 | 08:30 | Nonfarm Payrolls | June | 175K | 38K |
| July 08 | 08:30 | Nonfarm Private Payrolls | June | 170K | 25K |
| July 08 | 08:30 | Unemployment Rate | June | 4.8% | 4.7% |
| July 08 | 08:30 | Hourly Earnings | June | 0.2% | 0.2% |
| July 08 | 08:30 | Average Workweek | June | 34.4 | 34.4 |
| July 08 | 15:00 | Consumer Credit | May | $15.3B | $13.4B |
| Upcoming Federal Reserve FOMC Meeting Schedule & Rate Hike Probability ** |
| July 2016 | 26-27, (Tuesday-Wednesday) | 0% Chance |
| September 2016 | 20-21, (Tuesday-Wednesday)* | 0% Chance |
| November 2016 | 1-2, (Tuesday-Wednesday) | 0% Chance |
| December 2016 | 20-21 (Tuesday-Wednesday)* | 14% Chance |
| February 2017 | 01/31-02/01 (Tuesday-Wednesday)* | 14% Chance |
* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices. 