With some major economic data unavailable due to the government shutdown, and ahead of several major economic events in the near future, there was little market moving news this week, and mortgage rates ended nearly unchanged.
One economic report which was released this week revealed that housing market activity tapered off near the end of 2018. Sales of existing homes in December were down sharply from November and were 10% lower than a year ago. On a brighter note, the supply of homes for sale was a little larger than a year ago, and median home prices were 3% higher than a year ago.
Analysts cited a number of reasons for the decline in home sales late last year including rising mortgage rates, stock market volatility, higher home prices, and political concerns about the trade negotiations and the government shutdown. It remains to be seen whether the weak results for December were part of a longer-term trend or were due to temporary factors.
On Thursday, the report on new filings for jobless claims released each week unexpectedly fell to just 199,000, which was the lowest level since 1969. The accuracy of the results is a bit uncertain, though, since the number of claims for several states was an estimate rather than an actual count due to the Martin Luther King Jr. holiday on January 14.
As expected, Thursday’s European Central Bank (ECB) meeting revealed a modestly more dovish stance. The ECB held its benchmark interest rates steady and said that the central bank will not hike rates at least through the summer of 2019. According to the ECB, risks to economic growth in the region now favor the downside due to several factors including financial market volatility, geopolitical uncertainties, “the threat of protectionism” and “vulnerabilities in emerging markets.” There was little reaction to the meeting in U.S. markets.
Looking ahead, the important monthly Employment report will be released on Friday. As usual, these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the Core PCE price index, the inflation indicator favored by the Fed, is scheduled to be released on Thursday. The ISM national manufacturing index will come out on Friday. In addition, the next Fed meeting will take place on Wednesday. Investors do not expect any change in the federal funds rate, but they will be looking for guidance about the pace of future monetary policy tightening. Trade talks between the U.S. and China could influence mortgage rates next week as well.
Also note that the government shutdown which began on December 22 has caused delays in the release of some economic reports produced by government agencies and likely will continue to do so as long as it is in effect. It is generally not known in advance when the impacted data will be ready to be released.
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