The major stock indexes advanced to new all-time highs benefiting from a midweek rally triggered by encouraging corporate earnings reports and greater sentiment for economic growth. The Nasdaq Composite Index led the way with a 1.86% weekly gain, but investor attention was captivated by the Dow Jones Industrial Average finally closing above the 20,000 level. The week’s economic calendar featured December Existing Home Sales and New Home Sales, Advance fourth quarter GDP, and December Durable Goods Orders that were all somewhat disappointing, but the financial markets appeared to largely shrug them off by not showing much reaction. However, Treasury bond yields reversed their upward trajectory established on Tuesday and Wednesday following Friday’s poor GDP report. The week ended with the fed funds futures market showing rate hike expectations remain firm with implied probabilities for a 0.25% rate hike of 25.3% on March 15, 42.8% on May 3, and 71.9% on June 14. There were a couple of meaningful reports on the housing sector released during the week. First, the National Association of Realtors announced sales of Existing Homes fell 2.8% in December to a seasonally adjusted annual rate of 5.49 million units. This was below the consensus forecast of 5.55 million and was the lowest level since 1999. However, November's Existing Home Sales were revised higher to 5.65 million units, the highest sales pace since February 2007, from an initially reported 5.61 million units. For the year, Existing Home Sales increased to their highest level since 2006, reaching 5.45 million units in 2016 from 5.25 million units in 2015. Inventory of homes for sale continued to decline falling to its lowest level since 1999. Instead of a “normal” market with about a six-month supply of homes, there were only 1.65 million homes for sale at the end of December representing a 3 ½ month supply at the current sales pace. 
As for mortgages, mortgage application data for the week ending January 20 was released by the Mortgage Bankers Association (MBA) showing their overall seasonally adjusted Market Composite Index (application volume) increased by 4.0%. The seasonally adjusted Purchase Index rose 6.0% from the prior week, while the Refinance Index edged 0.2% higher. Overall, the refinance portion of mortgage activity decreased to 50.0% of total applications from 53.0% from the prior week. The adjustable-rate mortgage share of activity accounted for 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 increased from 4.27% to 4.35% with points decreasing to 0.30 from 0.39. For the week, the FNMA 3.5% coupon bond was unchanged at $102.03 while the 10-year Treasury yield increased 1.94 basis points to end at 2.4862%. Stocks ended the week higher with the Dow Jones Industrial Average gaining 266.53 points to end at 20,093.78. The NASDAQ Composite Index rose 105.45 points to close at 5,660.78, and the S&P 500 Index advanced 23.38 points to close at 2,294.69. Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 1.65%, the NASDAQ Composite Index has advanced 4.90%, and the S&P 500 Index has advanced 1.43%. This past week, the national average 30-year mortgage rate decreased to 4.24% from 4.25% while the 15-year mortgage rate decreased to 3.44% from 3.45%. The 5/1 ARM mortgage rate fell to 3.05% from 3.08%. FHA 30-year rates increased to 3.80% from 3.75% and Jumbo 30-year rates increased to 4.35% from 4.30%. Economic Calendar - for the Week of January 30, 2017 Economic reports having the greatest potential impact on the financial markets are highlighted in bold.
Mortgage Rate Forecast with Chart - FNMA 30-Year 3.5% Coupon Bond
The FNMA 30-year 3.5% coupon bond ($102.03, unchanged) traded within a 101 basis point range between a weekly intraday high of $102.48 on Monday and a weekly intraday low of $101.47 on Thursday before closing the week at $102.03. The chart shows the bond oscillated around resistance located at the 76.4% Fibonacci retracement level ($102.071) during the past week and is positioned once more to challenge this level. The major stock indexes are “overbought” and showing signs of weakening so the bond market could benefit this coming week from a stock market consolidation or pause. Should this occur, we could see a rise in bond prices (lower yields) leading to slightly lower mortgage rates.
As for mortgages, mortgage application data for the week ending January 20 was released by the Mortgage Bankers Association (MBA) showing their overall seasonally adjusted Market Composite Index (application volume) increased by 4.0%. The seasonally adjusted Purchase Index rose 6.0% from the prior week, while the Refinance Index edged 0.2% higher. Overall, the refinance portion of mortgage activity decreased to 50.0% of total applications from 53.0% from the prior week. The adjustable-rate mortgage share of activity accounted for 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 increased from 4.27% to 4.35% with points decreasing to 0.30 from 0.39. For the week, the FNMA 3.5% coupon bond was unchanged at $102.03 while the 10-year Treasury yield increased 1.94 basis points to end at 2.4862%. Stocks ended the week higher with the Dow Jones Industrial Average gaining 266.53 points to end at 20,093.78. The NASDAQ Composite Index rose 105.45 points to close at 5,660.78, and the S&P 500 Index advanced 23.38 points to close at 2,294.69. Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 1.65%, the NASDAQ Composite Index has advanced 4.90%, and the S&P 500 Index has advanced 1.43%. This past week, the national average 30-year mortgage rate decreased to 4.24% from 4.25% while the 15-year mortgage rate decreased to 3.44% from 3.45%. The 5/1 ARM mortgage rate fell to 3.05% from 3.08%. FHA 30-year rates increased to 3.80% from 3.75% and Jumbo 30-year rates increased to 4.35% from 4.30%. Economic Calendar - for the Week of January 30, 2017 Economic reports having the greatest potential impact on the financial markets are highlighted in bold. | Date | TimeET | Event /Report /Statistic | For | Market Expects | Prior |
| Jan 30 | 08:30 | Personal Income | Dec | 0.4% | 0.0% |
| Jan 30 | 08:30 | Personal Spending | Dec | 0.4% | 0.2% |
| Jan 30 | 08:30 | Core PCE Prices | Dec | 0.2% | 0.0% |
| Jan 30 | 10:00 | Pending Home Sales | Dec | 1.3% | -2.5% |
| Jan 31 | 08:30 | Employment Cost Index | Qtr. 4 | 0.6% | 0.6% |
| Jan 31 | 09:00 | S&P Case Shiller Home Price Index | Nov | 5.0% | 5.1% |
| Jan 31 | 09:45 | Chicago Purchasing Managers Index (PMI) | Jan | 55.0 | 54.6 |
| Jan 31 | 10:00 | Consumer Confidence Index | Jan | 112.5 | 113.7 |
| Feb 01 | 07:00 | MBA Mortgage Purchase Index | 01/28 | NA | 4.0% |
| Feb 01 | 08:15 | ADP Employment Change | Jan | 165,000 | 153K |
| Feb 01 | 10:00 | ISM Index | Jan | 55.0 | 54.7 |
| Feb 01 | 10:00 | Construction Spending | Dec | 0.2% | 0.9% |
| Feb 01 | 10:30 | Crude Oil Inventories | 01/28 | NA | +2.840M |
| Feb 01 | 14:00 | FOMC Rate Decision | Feb | 0.625% | 0.625% |
| Feb 02 | 07:30 | Challenger Job Cuts | Jan | NA | 42.4% |
| Feb 02 | 08:30 | Initial Jobless Claims | 01/28 | 250,000 | NA |
| Feb 02 | 08:30 | Continuing Jobless Claims | 01/28 | NA | NA |
| Feb 02 | 08:30 | Preliminary Productivity | Qtr. 4 | 1.0% | 3.1% |
| Feb 02 | 08:30 | Unit Labor Costs | Qtr. 4 | 1.9% | 0.7% |
| Feb 03 | 08:30 | Nonfarm Payrolls | Jan | 170,000 | 156,000 |
| Feb 03 | 08:30 | Nonfarm Private Payrolls | Jan | 175,000 | 144,000 |
| Feb 03 | 08:30 | Unemployment Rate | Jan | 4.7% | 4.7% |
| Feb 03 | 08:30 | Avg. Hourly Earnings | Jan | 0.3% | 0.4% |
| Feb 03 | 08:30 | Average Workweek | Jan | 34.3 | 34.3 |
| Feb 03 | 10:00 | Factory Orders | Dec | 1.4% | -2.4% |
| Feb 03 | 10:00 | ISM Services | Jan | 57.0 | 57.2 |
The FNMA 30-year 3.5% coupon bond ($102.03, unchanged) traded within a 101 basis point range between a weekly intraday high of $102.48 on Monday and a weekly intraday low of $101.47 on Thursday before closing the week at $102.03. The chart shows the bond oscillated around resistance located at the 76.4% Fibonacci retracement level ($102.071) during the past week and is positioned once more to challenge this level. The major stock indexes are “overbought” and showing signs of weakening so the bond market could benefit this coming week from a stock market consolidation or pause. Should this occur, we could see a rise in bond prices (lower yields) leading to slightly lower mortgage rates.