Trade continues to be the main concern for the policy makers at the Federal Reserve, as shown in the minutes released from September’s Federal Open Market Committee meeting. The minutes also showed that some of the FOMC members are concerned that the market is expecting more rate cuts than the Fed is willing to deliver.
This week we saw U.S. producer prices decline by 0.3% in September, the biggest drop in eight months. The numbers from the Labor Department show the smallest annual increase, just 1.4%, in nearly three years, meaning inflation is staying soft. This also keeps the door open for the Fed to cut rates again at their FOMC meeting Oct 29-30.
The Dow futures took a dive Wednesday evening, dropping as much as 300 points, amid reports that trade talks between the U.S. and China had once again stalled. The Dow regained more than 100 points later in the week on the news that President Trump would meet with Chinese Vice Premier Liu He on Friday. The Dow was set to gain about 300 or more points Friday morning as the potential for a trade deal soaked into the market. The 10-year Treasury note was trading at 1.55% on Wednesday before jumping to 1.743% as of Friday morning on the reports of Trump’s meeting with China.
We are still in the midst of a refinance boom with rates sitting around 3.57% in this week’s Freddie Mac survey of 30-year fixed-rate mortgage averages. What’s really intriguing about Freddie Mac’s survey is that, “the first-time homebuyer share of the loans Freddie Mac purchased in 2019 is 46%, a two-decade high.”
Loan activity is still going strong thanks to the consistent, low rates. The Mortgage Bankers Association showed that mortgage applications ticked up by 5.2% for the week ending Oct. 4.
The MBA’s Vice President of economic and industry forecasting, Joel Kan, said “As seen a few times this year, the large drop in rates caused another surge in refinance applications. The refinance index increased 10% to its highest level since late August, with both conventional and government refinances experiencing an upswing.”
According to HousingWire, that means the refi market is up a whopping 163% from this time in 2018. As expected, however, the purchase index is showing that it’s starting to slow down as purchase applications declined by 1%. However, Kan says purchase activity is still 10% higher year-over-year.