The stock market recorded its fourth consecutive weekly gain owing to a late rally on Friday. The broad-based advance resulted in the S&P 500 Index to its highest close so far this year, and within 1.08% of its ending level for 2015. Once again, stocks traded in tandem with the crude oil market during the week. The bond market began the week to the downside as oil prices rallied to their highest level in several weeks on Monday. Tuesday, bond prices made a nice bounce higher when safe-haven assets were bid higher after trade data from China rekindled fears of a global economic slowdown. China's February trade data showed a horrendous -25.4% decline in exports, the largest drop since May 2009. Unfortunately, bond prices slid lower for the remainder of the week with yields on the 10-year Treasury note rising to just below 2%, their highest level since late January. Bonds sold off in response to the European Central Bank’s (ECB) announcement of an aggressive stimulus package designed to boost Europe’s struggling economy. The widely anticipated stimulus plan included a 20 billion euro expansion of the ECB’s asset purchase program to 80 billion euro per month; an additional 10 basis point cut in the deposit rate to an even greater negative interest rate of -0.40%; a cut in the refinancing rate to 0.00% from 0.05%; and a cut in the marginal lending facility to 0.25% from 0.30%. Additional supply of Treasuries may have also been a factor for lower prices as the Treasury conducted auctions of $24 billion in 3-year notes; $20 billion in 10-year notes; and $12 billion in 30-year bonds during the week. Friday, higher equity markets in Asia overnight, a sharp rally in European stocks, and higher oil prices triggered a broad-based rally in U.S. stocks at the expense of the bond market. Crude oil prices were boosted by a report from the International Energy Agency (IEA) forecasting oil production from Brazil, Colombia, the U.S. and other non-OPEC producers would be lower this year. Also, oil services company Baker Hughes reported the number of active oil and natural gas rigs in the U.S. have plunged to their lowest level on record going back to 1949. Last week there were just 480 rigs drilling for oil and natural gas, down by a striking 57% from the same time in 2015. Traders interpreted these reports as a sign that the bottom may be in for oil prices. In housing news, CoreLogic reported 38,000 home foreclosures were completed during January, down 1.6% month-over-month, and down 16.2% from a total of 46,000 in January 2015. The current foreclosure inventory totals 1.2% of all homes with a mortgage in the U.S., down from 1.5% in January 2015. Homes currently in the process of foreclosure total 456,000, compared to 583,000 in January 2015, representing a decline in the national foreclosure inventory of 21.7% compared with January 2015. As for mortgages, the Mortgage Bankers Association released their latest Mortgage Application Data for the week ending March 4 showing the overall seasonally adjusted Market Composite Index increased 0.2%. The seasonally adjusted Purchase Index increased 4% from the prior reporting period while the Refinance Index decreased 2.0%. Overall, the refinance portion of mortgage activity decreased to 56.7% of total applications from 58.6%. The adjustable-rate mortgage segment of activity decreased to 5.2% of total applications from 5.6%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balance increased from 3.75% to 3.81%. For the week, the FNMA 3.0% coupon bond lost 67.1 basis points to end at $101.44 while the 10-year Treasury yield increased 10.5 basis points to end at 1.98%. Stocks ended the week with the Dow Jones Industrial Average increasing 206.54 points to end at 17,213.31. The NASDAQ Composite Index added 31.45 points to close at 4,748.47, and the S&P 500 Index gained 22.20 points to close at 2,022.19. Year to date, and exclusive of any dividends, the Dow Jones Industrial Average has lost 1.23%, the NASDAQ Composite Index has lost 5.45%, and the S&P 500 Index has lost 1.08%. This past week, the national average 30-year mortgage rate increased to 3.83% from 3.76% while the 15-year mortgage rate rose to 3.09% from 3.04%. The 5/1 ARM mortgage rate increased to 3.06% from 3.02%. FHA 30-year rates rose to 3.35% from 3.25% and Jumbo 30-year rates increased to 3.65% from 3.60%. Mortgage Rate Forecast with Chart For the week, the FNMA 30-year 3.0% coupon bond ($101.44, -67.1 bp) traded within a wider 96 basis point range between a weekly intraday low of $101.34 and a weekly intraday high of 102.30 before closing at $101.44 on Friday. The bond traded lower during the week, falling below a couple of support levels. On Friday, the bond traded in a range spanning support at the 50% Fibonacci retracement level located at $101.37 and resistance at the 50-day moving average at $101.68. The slow stochastic oscillator is showing an extremely “oversold” position with an almost complete loss of momentum. If the bond can remain above current support, we could possibly see a bounce higher toward resistance with a slight improvement in mortgage rates. However, if the bond breaks below primary support next week we could see a continuation lower for a test of secondary support at the 100-day moving average at $101.06 and this could lead to a slight worsening in rates. Chart: FNMA 30-Year 3.0% Coupon Bond 
Economic Calendar - for the Week of March 14, 2016 The economic calendar shifts into high gear this week with a mixture of reports on manufacturing, inflation, and housing. Date Time ET Event /Report /Statistic For Market Expects Prior Mar 15 08:30 Retail Sales Feb -0.1% 0.2% Mar 15 08:30 Retail Sales excluding automobiles Feb -0.2% 0.1% Mar 15 08:30 Producer Price Index (PPI) Feb -0.2% 0.1% Mar 15 08:30 Core PPI Feb 0.1% 0.4% Mar 15 08:30 New York Empire State Manufacturing Index Mar -9.5 -16.6 Mar 15 10:00 Business Inventories Jan 0.0% 0.1% Mar 15 10:00 NAHB Housing Market Index Mar 59 58 Mar 15 16:00 Net Long-Term TIC Flows Jan NA -$29.4B Mar 16 07:00 MBA Mortgage Index 03/12 NA 0.2% Mar 16 08:30 Consumer Price Index (CPI) Feb -0.2% 0.0% Mar 16 08:30 Core CPI Feb 0.1% 0.3% Mar 16 08:30 Housing Starts Feb 1,137K 1,099K Mar 16 08:30 Building Permits Feb 1,204K 1,202K Mar 16 09:15 Industrial Production Feb -0.3% 0.9% Mar 16 09:15 Capacity Utilization Feb 76.9% 77.1% Mar 16 10:30 Crude Oil Inventories 03/12 NA 3.88M Mar 16 14:00 FOMC Rate Decision Mar 0.375% 0.375% Mar 17 08:30 Initial Jobless Claims 03/12 266,000 259,000 Mar 17 08:30 Continuing Jobless Claims 03/05 NA 2,225K Mar 17 08:30 Philadelphia Fed Manufacturing Index Mar -1.4 -2.8 Mar 17 08:30 Current Account Balance Q4 -$116.0B -$124.1B Mar 17 10:00 Index of Leading Economic Indicators Feb 0.2% -0.2% Mar 18 10:00 University of Michigan Consumer Sentiment Mar 92.2 91.7 Upcoming Federal Reserve FOMC Meeting Schedule & Rate Hike Probability ** March 2016 15-16, (Tuesday-Wednesday)* 0% Chance April 2016 26-27, (Tuesday-Wednesday) 20% Chance June 2016 14-15, (Tuesday-Wednesday)* 43% Chance July 2016 26-27, (Tuesday-Wednesday) 50% Chance September 2016 20-21, (Tuesday-Wednesday) * 61% Chance November 2016 1-2, (Tuesday-Wednesday) 65% Chance December 2016 20-21 (Tuesday-Wednesday)* 75% Chance February 2017 01/31-02/01 (Tuesday-Wednesday)* 76% 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.
Economic Calendar - for the Week of March 14, 2016 The economic calendar shifts into high gear this week with a mixture of reports on manufacturing, inflation, and housing. Date Time ET Event /Report /Statistic For Market Expects Prior Mar 15 08:30 Retail Sales Feb -0.1% 0.2% Mar 15 08:30 Retail Sales excluding automobiles Feb -0.2% 0.1% Mar 15 08:30 Producer Price Index (PPI) Feb -0.2% 0.1% Mar 15 08:30 Core PPI Feb 0.1% 0.4% Mar 15 08:30 New York Empire State Manufacturing Index Mar -9.5 -16.6 Mar 15 10:00 Business Inventories Jan 0.0% 0.1% Mar 15 10:00 NAHB Housing Market Index Mar 59 58 Mar 15 16:00 Net Long-Term TIC Flows Jan NA -$29.4B Mar 16 07:00 MBA Mortgage Index 03/12 NA 0.2% Mar 16 08:30 Consumer Price Index (CPI) Feb -0.2% 0.0% Mar 16 08:30 Core CPI Feb 0.1% 0.3% Mar 16 08:30 Housing Starts Feb 1,137K 1,099K Mar 16 08:30 Building Permits Feb 1,204K 1,202K Mar 16 09:15 Industrial Production Feb -0.3% 0.9% Mar 16 09:15 Capacity Utilization Feb 76.9% 77.1% Mar 16 10:30 Crude Oil Inventories 03/12 NA 3.88M Mar 16 14:00 FOMC Rate Decision Mar 0.375% 0.375% Mar 17 08:30 Initial Jobless Claims 03/12 266,000 259,000 Mar 17 08:30 Continuing Jobless Claims 03/05 NA 2,225K Mar 17 08:30 Philadelphia Fed Manufacturing Index Mar -1.4 -2.8 Mar 17 08:30 Current Account Balance Q4 -$116.0B -$124.1B Mar 17 10:00 Index of Leading Economic Indicators Feb 0.2% -0.2% Mar 18 10:00 University of Michigan Consumer Sentiment Mar 92.2 91.7 Upcoming Federal Reserve FOMC Meeting Schedule & Rate Hike Probability ** March 2016 15-16, (Tuesday-Wednesday)* 0% Chance April 2016 26-27, (Tuesday-Wednesday) 20% Chance June 2016 14-15, (Tuesday-Wednesday)* 43% Chance July 2016 26-27, (Tuesday-Wednesday) 50% Chance September 2016 20-21, (Tuesday-Wednesday) * 61% Chance November 2016 1-2, (Tuesday-Wednesday) 65% Chance December 2016 20-21 (Tuesday-Wednesday)* 75% Chance February 2017 01/31-02/01 (Tuesday-Wednesday)* 76% 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.