The major stock market indexes began the week trading relatively flat until rallying on Thursday and Friday to set new record all-time highs following a discussion between President Trump and aviation executives where Trump promised “something phenomenal in terms of tax reform” in the next few weeks. The prospects for higher future corporate profits as a result of tax reform improved investor sentiment. Another factor contributing to the rally were signals from the Trump Administration that they were willing to cooperate with congressional Republicans on a plan to reduce entitlement spending as long as current beneficiaries would not be negatively impacted. The economic calendar was light with little in the way of data to have much influence on the bond market, but despite this, bond prices rose modestly while the yields decreased for intermediate and long-term Treasuries. Friday, investors largely ignored an unexpected decline in the University of Michigan’s Consumer Sentiment Index for February. The Index fell to 95.7 from January’s reading of 98.5 which was a decade high reading. Economists had expected a reading of 97.9. Still, there have only been five higher readings in the past 10 years. Mortgage application volume rose modestly during the week ending February 3. The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) advanced by 2.3%. The seasonally adjusted Purchase Index rose 2.0% from the prior week, while the Refinance Index also increased 2.0%. Overall, the refinance portion of mortgage activity decreased to 47.9% of total applications from 49.4% from the prior week, the lowest activity since June 2009. The adjustable-rate mortgage share of activity accounted for 6.9% 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 4.39% to 4.35% with points unchanged at 0.34. For the week, the FNMA 3.5% coupon bond advanced 15.8 basis points to close at $102.33 while the 10-year Treasury yield decreased 5.75 basis points to end at 2.4091%. Stocks ended the week higher with the major indexes setting new record all-time highs. The Dow Jones Industrial Average gained 197.91 points to end at 20,269.37. The NASDAQ Composite Index rose 67.36 points to close at 5,734.13, and the S&P 500 Index advanced 18.68 points to close at 2,316.10. Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has gained 2.50%, the NASDAQ Composite Index has advanced 6.12%, and the S&P 500 Index has gained 3.34%. This past week, the national average 30-year mortgage rate fell to 4.19% from 4.24%; the 15-year mortgage rate declined to 3.39% from 3.44%; the 5/1 ARM mortgage rate fell to 3.04% from 3.05%; and the FHA 30-year rate dropped to 3.75% from 3.80%. Jumbo 30-year rates decreased from 4.36% to 4.30%.
Economic Calendar - for the Week of February 13, 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 |
| Feb 14 | 08:30 | Producer Price Index (PPI) | Jan | 0.3% | 0.3% |
| Feb 14 | 08:30 | Core PPI | Jan | 0.2% | 0.2% |
| Feb 15 | 07:00 | MBA Mortgage Applications Index | 02/11 | NA | 2.3% |
| Feb 15 | 08:30 | Consumer Price Index (CPI) | Jan | 0.3% | 0.3% |
| Feb 15 | 08:30 | Core CPI | Jan | 0.2% | 0.2% |
| Feb 15 | 08:30 | New York Empire State Manufacturing Index | Feb | 7.0 | 6.5 |
| Feb 15 | 08:30 | Retail Sales | Jan | 0.1% | 0.6% |
| Feb 15 | 08:30 | Retail Sales excluding automobiles | Jan | 0.4% | 0.2% |
| Feb 15 | 09:15 | Capacity Utilization | Jan | 75.5% | 75.5% |
| Feb 15 | 09:15 | Industrial Production | Jan | 0.0% | 0.8% |
| Feb 15 | 10:00 | Business Inventories | Dec | 0.4% | 0.7% |
| Feb 15 | 10:00 | NAHB Housing Market Index | Feb | 68 | 67 |
| Feb 15 | 10:30 | Crude Oil Inventories | 02/11 | NA | +13.8M |
| Feb 15 | 16:00 | Net Long-Term TIC Flows | Feb | NA | $30.8B |
| Feb 16 | 08:30 | Housing Starts | Jan | 1,220K | 1,226K |
| Feb 16 | 08:30 | Building Permits | Jan | 1,230K | 1,210K |
| Feb 16 | 08:30 | Initial Jobless Claims | 02/11 | 245,000 | 234,000 |
| Feb 16 | 08:30 | Continuing Jobless Claims | 02/11 | NA | 2,078K |
| Feb 16 | 08:30 | Philadelphia Fed Manufacturing Index | Feb | 17.5 | 23.6 |
| Feb 17 | 10:00 | Index of Leading Economic Indicators | Jan | 0.5% | 0.5% |
Mortgage Rate Forecast with Chart - FNMA 30-Year 3.5% Coupon Bond The FNMA 30-year 3.5% coupon bond ($102.33, +15.8 bp) traded within a 77 basis point range between a weekly intraday high of $102.91 on Wednesday and a weekly intraday low of $102.14 on Friday before closing the week at $102.33. The chart shows the bond moved higher Monday through Wednesday, breaking above resistance from the 50-day and 25-day moving averages. On Wednesday, the bond closed above additional resistance at the 61.8% Fibonacci retracement level before being turned away on Thursday. Thursday’s negative, red candlestick actually appears worse than it is as it reflects a monthly coupon bond repricing of -22 basis points after the close of trading. The bond bounced back modestly on Friday, rising from the 50-day moving average to close on the 25-day moving average which also serves as closest resistance. There is a negative stochastic crossover sell signal showing, but this is largely a result of the monthly coupon repricing and can therefore be discounted. Overall, the chart indicates price direction is unclear, suggesting traders will likely take a wait-and-see approach until more robust economic data arrives this coming week. Depending on economic and political news, bond prices could head in either direction, but will certainly break out of the current narrow range between technical support and resistance. A break above resistance could lead to a slight improvement in mortgage rates while a drop below support could result in slightly worse rates.
