Stock markets closed with mixed results this week. The Dow is down, the S&P is flat, and the Nasdaq is higher.
2023 is turning out to be a banner year for the tech-heavy Nasdaq. All markets were lower before rallying on Friday when President Biden told reporters that a deal to raise the debt ceiling was very close. Bond yields and mortgage rates have jumped. Much of the increase is due to fear that a debt ceiling deal may not materialize and the U.S. could default on its debt. Several rating companies warned they would downgrade the U.S. credit if the debt ceiling goes unchanged.
There was a lot of positive economic news this week. That also puts pressure on interest rates. The stronger the economy, the greater the potential for inflation. Many experts felt the economy was slowing, but initial jobless claims unexpectedly dropped this week. In April, consumer spending increased by 0.8%. Consumer spending accounts for about 70% of the economy. More spending leads to higher inflation.
The Personal Consumption Expenditures Price Index, a key inflation index for the Fed, rose 0.4% in April. Year-over-year consumer prices were 4.4% higher in April, up from a 4.2% year-over-year increase in March.
• The Dow Jones Industrial Average closed the week at
33,093.34, down 1% from 33,426.63 last week. It is down 0.7%
• The S&P 500 closed the week at 4,205.45, up 0.3% from
4,191.98 last week. It is up 9.5% year-to-date.
• The Nasdaq closed the week at 12,975.69, up 2.5% from
12,657.90 last week. It is up 24% year-to-date.
U.S. TREASURY BOND YIELDS:
We watch bond yields because mortgage rates follow bond yields. The 10-year treasury bond closed the week yielding 3.80%, up from 3.70% last week. The 30-year treasury bond yield ended the week at 3.96%, almost unchanged from 3.95% last week.
The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of May 23, 2023, were as follows: The 30-year fixed mortgage rate was 6.57%, up from 6.39% last week. The 15-year fixed was 5.97%, up from 5.75% last week. The 30-year fixed rate was about 7% at the end of the week. Experts felt this is due to fear of a default if the debt ceiling does not rise and rates will drop once a deal is reached.