Up and down week, right back to where we started

Happy Friday from Local Mortgage!

Markets bounced around this week due to mixed headlines but will end the week right about where we were last Friday at 6.125% for our very best 30-year fixed conventional scenario.

The conflict with Iran has been unfavorable for mortgage rates for a couple of reasons. Most significantly, oil prices have risen substantially, which greatly increases inflationary pressures. In addition, military spending has gone up, and the government may need to issue more bonds to fund the deficit. An increase in supply would cause yields to rise. These negative effects could be partially offset if higher energy prices lead to a reduction in global economic growth, which typically lowers the outlook for future inflation.

The key Employment report revealed that the economy added a substantial 115,000 jobs in April, well above the consensus forecast for a gain of 60,000. Strength was seen in healthcare, transportation, social assistance, and retail. On the downside, information services continued to lose jobs. Looking at the other major components of the report, average hourly earnings, an indicator of wage growth, rose just 0.2% from March, below the consensus forecast for an increase of 0.3%. They were 3.6% higher than a year ago, up from an annual rate of 3.5% last month, which was the lowest level since May 2021. The unemployment rate was unchanged at 4.3%, as expected.

Looking ahead, attention will remain fixed on the conflict in the Middle East. Investors also will monitor comments from Fed officials about future monetary policy. For economic data, Existing Home Sales will come out on Monday. The Consumer Price Index (CPI), a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services, will be released on Tuesday. The Producer Price Index (PPI), another monthly inflation indicator, will come out on Wednesday. Import Prices and Retail Sales will be released on Thursday. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of the economy.

Hope everyone has a great weekend and thank you for reading.