Wall Street rallied this week as the country starts to slowly reopen businesses, there are some signs of peaking regarding hospitalizations for COVID-19 and there have been more positive studies about potential treatments. However, the data still paints a dismal picture for the hole the United States’ economy will have to dig out of.
The tally has pushed past 30 million Americans who have filed initial unemployment claims over the last six weeks. It is positive to note that each week the number of new claims has gone down. Also, continuing claims for unemployment is just under 18 million–which is 2.2 million higher than last week.
Surprisingly, despite that negative data, Wall Street had a solid week through Thursday. The S&P 500 finished up 10% for April, its best month since 1987. Friday’s Dow futures did hit a rough spot after Apple and Amazon release quarterly earnings and projections, dropping 400 points to start trading.
The most staggering data point released this week came from the Bureau of Economic Analysis. In Q1, the gross domestic product reading shows the U.S. economy contracted by 4.8%. And that number is expected to be revised down as the final data comes through.
The Federal Reserve announced this week it will expand its support of the economy by adding to its Main Street Lending program. It now includes businesses with up to 15,000 employees and up to $5 billion in revenue. The Fed has also changed the types of loans it is allowing. There are now three categories of loans entitled New, Priority and now, Expanded. The Expanded loans start at $10 million. CNBC breaks down all the details of the loan requirements themselves.
The Fed also said it would continue to support the mortgage industry through securities purchases, saying “To support the flow of credit to households and businesses, the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor market conditions and is prepared to adjust its plans as appropriate.”
Freddie Mac rate average hits all-time low
The average for a 30-year fixed-rate mortgage hit an all-time low this week for Freddie Mac. Sitting at 3.23%, this is the lowest the Freddie Mac average has been since the entity started keep track of rates in 1971. While that is good news for current homeowners who might be able to benefit from a refinance, it’s not terribly helpful for folks who are out of work and cannot get a mortgage loan without a job.
The latest data from the Mortgage Bankers Association shows that, despite the millions of Americans without a job, purchases went up last week by 12% compared to the week before. As expected, the year-over-year number is down for purchases but that weekly increase is a big positive as we move into phased reopenings of state economies.
The MBA’s Vice President of Industry and Economic Forecasting, Joel Kan, was upbeat in his remarks. “The ten largest states had increases in purchase activity, which is potentially a sign of the start of an upturn in the pandemic-delayed spring homebuying season, as coronavirus lockdown restrictions slowly ease in various markets,” said Kan. “California and Washington continued to show increases in purchase activity, with New York seeing a significant gain after declines in five of the last six weeks.”
Kan went on, saying, “Contributing to the uptick in purchase applications was that mortgage rates fell to another record low in MBA’s survey, with the 30-year fixed rate decreasing to 3.43%. However, refinance activity declined 7%, as rates for refinances likely remained higher than those for purchase loans. Lenders are still working through pipelines at capacity, and observed changes in credit availability for refinance loans have also in turn impacted rates.”