Anticipation Meets Reality: The Weekly Market Update

Anticipation Meets Reality: The Weekly Market Update

Change is Difficult

We have used some rather broad terms regarding describing the mood of the markets over the past few months. Words such as “confidence” and “uncertainty.” Today we would like to use another word — “anticipation.” One reason for the markets’ confidence in the past several months has been the anticipation of changes that would spur the economy. Logically, the markets knew these changes would take time, but when you have a rush of adrenaline, markets tend to get ahead of themselves.

Since the peak reached at the beginning of March, stocks have moved sideways and then turned decidedly negative in the second half of the month. Now, we do know that the market can’t go up every month and certainly stocks were due for a pause or correction. So, the question is–are stocks taking a breather, or are the markets getting antsy because of the realization that this is Washington and changes do not come quickly in Washington? Certainly, the fight over the heath care bill is an example of how difficult change can be.

Stocks could roar right back — even before this commentary is published. But if stocks continue to correct or just tread water from here, it may be that the markets want to see real news of economic growth before they rise again — as opposed to the anticipation of news. Some of that news may come in the form of the jobs report to be released this week. Meanwhile, the good news about this pause is that interest rates have also fallen with the stock market. This is happening despite the fact that the Federal Reserve Board raised short-term rates this month. What we are seeing is more proof that the Fed can’t control long-term rates. Having rates fall a bit just as the Spring real estate season starts is certainly not bad news.

The Weekly Market Update

Rates moved down for the second week in a row, coinciding with a weaker stock market. For the week ending March 30, Freddie Mac announced that 30-year fixed rates fell to 4.14% from 4.23% the week before. The average for 15-year loans decreased to 3.39%, and the average for five-year adjustables moved down to 3.18%. A year ago, 30-year fixed rates averaged 3.71%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield remained relatively flat this week. The rate on 30-year fixed loans fell 9 basis points to 4.14 percent, another significant week-over-week decline. Despite recent interest rate fluctuations, new home sales far exceeded expectations in February and jumped 6.1 percent to an annualized rate of 592,000."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.