Market Moving News – January 21

Stock Market Futures React to Trump's 10% EU Tariffs: Tariff announcements tend to create uncertainty in the markets. When investors get nervous about trade tensions, they often move money into safer assets like bonds. This "flight to safety" pushes bond prices up and yields down, which can bring mortgage rates lower. However, tariffs can also fuel inflation concerns over time, which would have the opposite effect. For now, expect some volatility as markets digest the news. As we saw today, where the bond market reacted and mortgage rates are up.

Key Events This Week:

1. December Pending Home Sales Data (Wednesday) This report gives us a preview of future closed sales since pending contracts typically close in 30 to 60 days. A stronger than expected number could signal resilient buyer demand despite higher rates, while a weaker number might add pressure for rates to ease. Either way, it's a good pulse check on how buyers are responding to current conditions.
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2. US Q4 2024 GDP Data (Thursday) Economic growth data is always a big one for bonds. If GDP comes in hotter than expected, it suggests the economy is running strong, which typically pushes rates higher as inflation concerns rise. A softer reading could ease pressure on rates. The market is watching to see if the economy is finally cooling or still running full steam. Remember, there is no need for lower rates if the economy is growing.
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3. December PCE Inflation Data (Thursday) This is the Fed's preferred inflation measure, so it carries serious weight. Lower than expected inflation would be welcome news for rates, as it gives the Fed more room to consider cuts down the road. Higher inflation keeps the pressure on and could push rates up. This is probably the most important report of the week for mortgage rates.
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4. January S&P Global PMI Data (Friday) The PMI tells us how the manufacturing and services sectors are performing. Readings above 50 signal expansion, below 50 signals contraction. A strong report points to continued economic momentum, which generally isn't great for rates. A weaker report could help bonds rally.
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5. 10% of S&P 500 Companies Report Earnings This Week Earnings season always adds volatility. Strong corporate results tend to boost stocks and pull money away from bonds, pushing rates higher. Disappointing earnings can trigger a move back into bonds for safety, helping rates improve.
   

Thursday is the day to watch with both GDP and PCE inflation hitting the same morning. Luckily, we will be discussing the news in real time on my webinar.

Those two reports together will likely set the tone for rates heading into the following week. With markets closed Monday and a lot of data packed into just four trading days, we expected some choppy conditions. The point of the newsletter and the webinar is to stay ahead of the news.

Yes, mortgage rates are trending in the right direction, but it’s not a straight line.

More on the webinar Thursday at 10 AM PST.