Rates Improve as Fed Rate Hike Less Likely

Mortgage interest rates improved again this past week as limited inflation is calling into question whether the Fed will increase the Fed Funds rate as well as curtail its balance sheet. The European Central Bank left its benchmark rate unchanged and did not indicate when it would withdraw its quantitative easing. Geopolitical concerns are supporting interest rates as well as North Korea has added a hydrogen bomb and short range missiles believed to be able to reach Japan and Guam. President Trump agreed to extend the debt limit through December. Hurricane Irma is expected to hit Florida this weekend. Economic data was limited. Of note, the July Trade Deficit, Q2 Productivity, and July Wholesale Inventories were better than expected. July Factory Orders, the August ISM Services Sector Index, Jobless Claims, and Q2 Unit Labor Costs were weaker than expected. Jobless Claims were up substantially due to Hurricane Harvey. Also of note, President Trump is pushing for tax cuts this year.

The Dow Jones Industrial Average is currently at 21,841, down almost 150 points on the week. The crude oil spot price is currently at $48.17 per barrel, up almost $1 per barrel on the week. The Dollar weakened versus the Euro and Yen on the week.

Next week look toward Tuesday’s NFIB Small Business Optimism Index, Wednesday’s Producer Price Index (PPI), Thursday’s Consumer Price Index (CPI) and Jobless Claims, and Friday’s Retail Sales, Empire State Manufacturing Survey, Industrial Production, Business Inventories, and Consumer Sentiment Index as potential market moving events.