In an interesting twist, after the unemployment report for March was released last Friday stocks turned to positive territory and mortgage rates took a hit. Markets were closed when the report was released due to Good Friday. Investors were expecting a sell-off pretty much across the board once trading began today. Why? The number of new jobs created last month fell to 126,000, breaking below the 200,000 barrier for the first time since December 2013. Investors had anticipated something closer to 250,000 new jobs. But that didn’t happen. January and February payroll numbers were revised downward as well.
The initial response last Friday for mortgage rates showed a slight drop in rates and many were thinking that any rate increase by the Fed in June was out of the picture. Instead, it could very well be until 2016 before any rate moves are made. But the interesting twist points to how stocks are faring in light of the bad employment numbers.
For the past several weeks, stocks and bonds had been acting in a more traditional sense with good news boosting stocks and hurting bonds. The Dow and S&P 500 hit record levels and rates gradually moved upward, fully anticipating a rate increase before July. Over the past two years, as the economy grudgingly turned positive, stocks retreated as any indication of an expanding economy meant the Fed would indeed end its rather expensive QEIII program. Yet just last October, when the Fed stopped purchasing Treasuries and mortgage backed securities, nothing really happened. The sky didn’t fall after all.
So what does that tell us about mortgage rates for the rest of the year? Don’t expect interest rates to fall back to historic levels but they may certainly retreat somewhat. But for those who were anticipating interest rates to creep above the 4.00% mark, well, let’s just say they might be waiting a bit longer. This of course is all educated conjecture and stocks and bonds are still acting oddly. But from a traditional perspective, rates should remain in a tight range.