The major stock market indexes ended “mixed” for the week as global economic worries reappeared toward the end of the week to send the indexes lower from their best levels. Global equity markets fell on Thursday following investor concerns about economic growth in the eurozone. These concerns were triggered by comments made by European Central Bank President Mario Draghi who warned about "lasting economic consequences" after years of weak business output and productivity. Draghi claimed if structural reforms were not imposed by governments "without undue delay", the Eurozone economy was at risk of “suffering lasting economic damage.” Investors also showed concern later in the week following a significant drop in European markets that was triggered by growing fears Great Britain would vote on June 23 to leave the European Union. A decline in oil prices below $50 per barrel on Friday also seemed to weigh on sentiment after oil hit over $51 per barrel on Wednesday and Thursday. However, bond prices improved modestly to send yields lower more in response to falling global yields rather than to the week’s scarce economic data. As for mortgages, the Mortgage Bankers Association (MBA) released their latest Mortgage Application Data for the week ending June 4
th showing the overall seasonally adjusted Market Composite Index rose 9.3%. The seasonally adjusted Purchase Index increased 12.0%, while the Refinance Index increased 7.0%. Overall, the refinance portion of mortgage activity decreased to 53.8% of total applications from 54.3%. The adjustable-rate mortgage share of activity was unchanged at 5.0% of total applications. According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balance decreased from 3.85% to 3.83%. For the week, the FNMA 3.0% coupon bond lost 1.6 basis points to end at $102.88 while the 10-year Treasury yield decreased 5.8 basis points to end at 1.6438%. Stocks ended the week with the Dow Jones Industrial Average gaining 58.28 points to end at 17,865.34. The NASDAQ Composite Index lost 47.97 points to close at 4,894.55, and the S&P 500 Index fell 3.06 points to close at 2,096.07. Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 2.46%, the NASDAQ Composite Index has lost 2.31%, and the S&P 500 Index has gained 2.49%. This past week, the national average 30-year mortgage rate fell to 3.58% from 3.62% while the 15-year mortgage rate decreased to 2.88% from 2.92%. The 5/1 ARM mortgage rate fell to 2.97% from 3.00%. FHA 30-year rates held steady at 3.25% while Jumbo 30-year rates decreased to 3.60% from 3.65%.
Mortgage Rate Forecast with Chart For the week, the FNMA 30-year 3.0% coupon bond ($102.88, -1.6 bp) traded within a narrower 44 basis point range between a weekly intraday high of $103.14 and a weekly intraday low of $102.70 before closing at $102.88 on Friday. Thursday’s large red candlestick reflects a monthly FNMA 30-year 3.0% coupon bond rollover of minus 27 basis points that distorts the technical chart and must be disregarded. Monthly rollovers usually occur on the 9
th or 10
th of each month. The bond rebounded Friday on stock market weakness and approached the $103.00 resistance level before pulling back. The doji candlestick formed Friday shows some market indecision among traders. Support is found at the 25-day moving average at $102.53. The slow stochastic oscillator continues to show the bond is “overbought” and will be susceptible to a pullback unless the stock market undergoes a correction. This week coming week the economic calendar heats up with several economic releases that could have a meaningful impact on the bond market including the Federal Reserve’s latest interest rate decision and commentary on monetary policy on Wednesday June 15. Disappointing economic news may propel bond prices higher to challenge overhead resistance at $103.00 and should this happen rates would remain low or improve slightly.
Chart: FNMA 30-Year 3.0% Coupon Bond
Economic Calendar - for the Week of June 13, 2016 The economic calendar broadens this coming week with a number of reports likely to attract investor attention. Economic reports having the greatest potential impact on the financial markets are highlighted in bold.
| Date | TimeET | Event /Report /Statistic | For | Market Expects | Prior |
| Jun 14 | 08:30 | Export Prices excluding agriculture | May | NA | 0.5% |
| Jun 14 | 08:30 | Import Prices excluding oil | May | NA | 0.1% |
| Jun 14 | 08:30 | Retail Sales | May | 0.3% | 1.3% |
| Jun 14 | 08:30 | Retail Sales excluding automobiles | May | 0.4% | 0.8% |
| Jun 14 | 10:00 | Business Inventories | Apr | 0.2% | 0.4% |
| Jun 15 | 07:00 | MBA Mortgage Index | 06/11 | NA | 9.3% |
| Jun 15 | 08:30 | Producer Price Index (PPI) | May | 0.3% | 0.2% |
| Jun 15 | 08:30 | Core PPI | May | 0.1% | 0.1% |
| Jun 15 | 08:30 | NY Empire State Manufacturing Index | Jun | -4.7 | -9.0 |
| Jun 15 | 09:15 | Capacity Utilization | May | -0.2% | 0.7% |
| Jun 15 | 09:15 | Industrial Production | May | 75.2% | 75.4% |
| Jun 15 | 10:30 | Crude Oil Inventories | 06/11 | NA | -3.226M |
| Jun 15 | 14:00 | FOMC Rate Decision | Jun | 0.37% | 0.37% |
| Jun 15 | 16:00 | Net Long-Term TIC Flows | Apr | NA | $78.1B |
| Jun 16 | 08:30 | Consumer Price Index (CPI) | May | 0.3% | 0.4% |
| Jun 16 | 08:30 | Core CPI | May | 0.2% | 0.2% |
| Jun 16 | 08:30 | Initial Jobless Claims | 06/11 | 270,000 | 264,000 |
| Jun 16 | 08:30 | Continuing Jobless Claims | 06/04 | NA | 2,095K |
| Jun 16 | 08:30 | Philadelphia Fed Manufacturing Index | Jun | 1.2 | -1.8 |
| Jun 16 | 08:30 | Current Account Balance | Q1 | -$125.0B | -$125.3B |
| Jun 16 | 10:00 | NAHB Housing Market Index | Jun | 59 | 58 |
| Jun 17 | 08:30 | Building Permits | May | 1,155K | 1,172K |
| Upcoming Federal Reserve FOMC Meeting Schedule & Rate Hike Probability ** |
| June 2016 | 14-15, (Tuesday-Wednesday)* | 2% Chance |
| July 2016 | 26-27, (Tuesday-Wednesday) | 21% Chance |
| September 2016 | 20-21, (Tuesday-Wednesday)* | 35% Chance |
| November 2016 | 1-2, (Tuesday-Wednesday) | 36% Chance |
| December 2016 | 20-21 (Tuesday-Wednesday)* | 54% Chance |
| February 2017 | 01/31-02/01 (Tuesday-Wednesday)* | 57% 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. 