We shifted our outlook from neutral to locking a week ago today and the move proved correct as mortgage rates increased by .125%-.25% last week. The culprit for higher rates was a combination of the stock market rally AND a stronger than expected jobs report.
Friday’s all-important jobs report showed that the US economy added 236,000 private sector jobs during the month of February. The stronger than expected number pushed the unemployment rate down to 7.7% (from 7.9%) and that much closer to the 6.5% threshold where the Fed said it would unwind quantitative easing.
As has been well publicized the Dow Jones Industrial Average (DJIA) created new all-time nominal highs last week. The DJIA has closed higher in 6 consecutive sessions but is starting off this morning modestly lower.
The economic calendar doesn’t heat up until Wednesday when we get a look at retail sales. Thursday and Friday bring important reads on inflation.
From a technical standpoint mortgage rates should stabilize this week and possibly even improve slightly from last weeks push higher. That said, all signs suggest that the economy is continuing to improve which means the Fed will “take away the punch bowl” in the future. It will tough for rates to improve substantially.
Current Outlook: floating