Several disruptions in global financial markets sent equity prices lower and Treasury bond prices higher resulting in lower yields. Stocks suffered their third week of losses as investors were concerned about how corporate earnings would be affected by falling energy prices, the rising U.S. dollar, and other economic factors.
Longer-maturity U.S. Treasuries rallied strongly during a week punctuated by increasing fears over global deflation, sending the yield on the 30-year “long bond” to an all-time low. Meanwhile, the benchmark 10-year Treasury note’s yield touched its lowest level since May 2013 and finished the week at 1.83%.
Several reports during the week left substantial impacts on the financial markets. On Wednesday, the December Retail Sales report surprisingly showed a decline of -0.9% when analysts were looking for a slight increase of 0.1%. The sharp decline in Retail Sales was a direct result of the poor income growth indicated in the December employment report that showed a contraction in the average hourly wage. Without any income growth, the only way for Retail Sales to show improvement is for consumers to tap into their personal savings, and this is something most consumers would prefer not to do.
On Thursday, a shocking foreign exchange policy change from the central bank of Switzerland stunned global currency markets and added to the demand for safe-haven assets, including U.S. Treasuries. The Swiss National Bank abandoned a cap on the price of the Swiss franc in terms of euros that it had maintained by selling francs, triggering a sudden appreciation of almost 30% of the Swiss franc against the euro. Several retail foreign exchange brokerages and their clients were totally blindsided by the unexpected decision by the Swiss National Bank and lost hundreds of millions of dollars.
On Friday, the Consumer Price Index (CPI), driven down by lower energy prices, posted its largest decline in six years in December. The CPI fell 0.4%, the most since December 2008. Analysts said it will increase chances the Federal Reserve will hold off raising interest rates until late this year. The core CPI, which strips out food and energy costs, was unchanged, just the second time since 2010 that it didn’t increase. Year-over-year, core CPI is up only 1.6% and down from a 1.7% increase in November. Usually, the CPI runs about 0.5 percentage points below the PCE price index. Therefore, current inflation trends are about 1.0% below the Fed’s implied CPI target of roughly 2.5% and are downward trending. As long as this downward trend remains, the Fed will be hard pressed to raise interest rates.
For the week, the FNMA 3.5% coupon bond lost 14.1 basis points to end at $105.02 while the 10-year Treasury yield fell 11.9 basis points to reach 1.83%. Stocks ended with the NASDAQ Composite losing 69.69 points, the Dow Jones Industrial Average dropping 225.80 points, and the S&P 500 falling 25.39 points.
To date for 2015, and exclusive of any dividends, the NASDAQ Composite has dropped 2.19%, Dow Jones Industrial Average has lost 1.78%, and the S&P 500 has given up 1.96%. The national average 30-year mortgage rate fell from 3.71% to 3.63% while the 15-year mortgage rate dropped to 3.00% from 3.04%. The 5/1 ARM mortgage fell to 3.22% from 3.24%. FHA 30-year rates held steady at 3.25% and Jumbo 30-year rates fell to 3.60% from 3.64%.
Mortgage Rate Forecast with Chart
The FNMA 3.5% coupon bond ($105.02) lost 14.1 basis points during a week when the mortgage bond market showed an increase in volatility. Wednesday through Friday there were considerably larger intraday trading ranges than usual where prices soared above overhead resistance levels located at $105.33 and $105.48 only to end up below them by week’s end.
On Friday for instance, the bond opened nine basis points lower at $105.45 and traded up to a high of $105.61 before plunging to a low of $104.89 to complete an expanded intraday trading range of 72 basis points. The day’s negative candlestick pushed price well below what is now a dual layer of strong overhead resistance at $105.48 and $105.33. Support is now defined by the 25-day moving average at $104.47.
Furthermore, a new sell signal was generated from a negative stochastic crossover as the %K line has crossed below the %D line in the slow stochastic oscillator. Despite Friday’s price drop and negative crossover the bond remains significantly “overbought” and could be susceptible to further price weakness in the coming week.
Stocks rallied on Friday snapping a five session losing streak. If stocks continue to rebound this week as fourth quarter corporate earnings season swings into high gear, it could trigger some profit taking in the bond market and send yields a little higher.
Chart: FNMA 30-Year 3.5% Coupon Bond
Economic Calendar – for the Week of January 19
The economic calendar is heavily focused on the housing sector and features the NHAB Housing Market Index on Tuesday; the weekly MBA Mortgage Index, Housing Starts, and Building Permits on Wednesday; weekly Initial and Continuing Jobless Claims, the FHFA Housing Price Index, and crude oil inventories on Thursday; and Existing Home Sales and the Index of Leading Economic Indicators on Friday. Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.
Road Signs – If You Are Trying To Lose Weight, Avoid These Three Foods
By Jon Allo
The secret of how to lose weight safely and effectively it is to know what you are eating is delivering all of the nutritional goodness that your body needs. Though it may sound simple to just remove three kinds of foods from your diet, these changes alone could help you cut back on a lot of calorie consumption. There is a fundamental blueprint for how to lose weight. You have to eat the proper foods, not eat too much, and let your physical actions burn up the food it’s been fed. But it’s not always that simple when you’re trying to lose weight.
You can exercise as hard as you want, but if you are replacing those calories that you’ve burned with unhealthy foods, chemicals and extra fats, it is very unlikely that you will reach the weight loss goals that you want. If you’re trying to lose weight by not eating, it is not the way to lose weight successfully. If you try starving yourself, you’ll only harm yourself in the long run. You have to eat and make the right food choices. Here are three foods types to avoid if you’re trying to lose weight.
Foods From a Box Can or Carton
When you’re trying to lose weight, stay away from processed foods that come in a box, can, bag or carton. They are often modified to extend shelf life leading to little or nutritional value and often the level of fats, sodium and sugars in these foods are extremely high. Just take a look at the back of the box. How many of the ingredients can you actually read? Aim to eat foods that are as natural as possible, as they allow your body to get more nutrients.
High Calorie Drinks
Drinking excessive amounts of carbonated drinks is one of the biggest reasons for gaining weight today. The popular colas all contain large amounts of both sugar and calories. Watch out too for high-calorie sports drinks or fruit juices, which are often packed with sugar. Beware of drinks from the coffee shop. Drinks like lattes, americanos, cappuccinos and frappuchinos are extremely high calorie drinks. The best drink you can have when you’re trying to lose weight is water. It has no preservatives, no sodium, and no calories and helps to fill you up so you won’t feel too much of an urge to eat tempting foods.
Processed meats are generally made up of different body parts that couldn’t be sold separately and all mixed with significant amounts of fat, preservatives, chemicals and salt. You can check online to see what goes into meats such as pastrami, salami, hot dogs and sausages. Hamburgers and minced meats can also count as processed meat if they have been preserved with salt or chemical additives. If you stick to lean, whole meats, you’ll eat fewer calories and you’ll be eating far healthier overall.
ABOUT THE AUTHOR
Do you want to learn more ways to lose weight and get fit? Are you confused about healthy eating? Do you want to know the best workout techniques to get the results you want? Get more nutritional information, the best exercise programs, fitness motivation and a FREE eBook with over 100 tips for losing belly fat here.