Market Update: Interest rates unfazed by improving stocks and oil markets
After taking direction from the sell-off in global equities and crude oil market for all of 2016, it’s surprising that the rate markets held in as well they did last week as equities and oil continued to rebound. The yield on the benchmark 10 year Treasury note ended the week at 1.76%, up only about 1 basis point from last Friday’s closing mark. Mortgage rates were mostly unchanged as well.
The U.S. stock markets continued to march forward with the S&P 500 ending the week at 1,948; just two weeks ago the S&P 500 was flirting with reaching 1,800. We’ve also seen a substantial improvement in crude oil prices with the front month crude contract closing at nearly $33 per barrel and even trading above $34 at one point.
Economic data this week was a mixed bag with only a few positive notes. Most notably, 4th quarter GDP came in higher than expected at +1.0% versus economists’ expectations of .7%. Workers in the U.S. also saw a rise in personal income at +.5% versus .4% expected.
The U.S. home market appears to be reaping the benefit of an improved labor market and rising incomes. Additionally, historically low interest rates are also helping to provide home prices with sustainable growth. In December, the S&P/Cash-Shiller 20-City US Home Price Index improved to .80%, in-line with the .85% expectations of economists. Year-over-year, the index has climbed by 5.7%.
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