Let me just say that Tuesday’s plummet by the Dow Jones Industrial Average (of nearly 1,300 points) and S&P averages on the stock market was not what I was expecting with the release of the latest consumer inflation numbers. However, I guess traders did not expect core inflation – which leaves out food and energy prices – to rise as much as it did.
This latest Consumer Price Index has been highly anticipated as the last look at consumer inflation trends before the Fed’s first meeting back from summer break, which convenes next week. Having damning evidence of greater than expected inflation could lead to more aggressive moves by the Fed, and equity and bond markets reacted heavily.
Anyhow, markets are volatile and emotional and on Tuesday stock prices fell through the floor. What did this do for mortgage rates? In short, they got worse. According to Freddie Mac’s most recent survey of average rates, published late last week, rates had already continued their march higher and at the end of trading on Tuesday, rates had trended higher still.
As for what’s happening the rest of the week, we get more inflation news on Wednesday with the Producer Price Index. Wholesale prices cooled more than expected in July, falling 0.5 percent on the month and rising only 0.2 percent when excluding food and energy. August’s expectations are a decline of 0.1 percent overall and a 0.3 percent rise for the core with year-over-year rates expected at 8.7 and 7.0 percent, which would be down from 9.8 and 7.6 percent in July. We’ll be anxiously awaiting the outcome and subsequent market reaction.
How all this inflation is filtering through to consumer behavior, which represents two-thirds of our nation’s economy, will be the subject of Thursday’s Retail Sales report. Total sales were flat in July though core sales posted gains, up 0.4 percent excluding vehicles and up 0.7 percent when excluding both vehicles and gasoline. August’s forecasts are unchanged overall with ex-vehicles up 0.1 percent and ex-vehicles ex-gas up 0.4 percent. If retail sales fall, we could see further volatility in stocks and rates.
Latest research by Freddie Mac revealed that the more access you have to various funding sources the more you can save ($1,500 to $3,000) over the life of your mortgage. That’s why I’m a broker because I have access to the widest range of home financing options for YOU. If you’re considering a purchase or home equity line, reach out, and let’s look at your options.
