Stocks and Oil Volatile
It has been a wild ride for the markets this summer. After a fairly calm beginning of the year which saw moderate gains, stocks have been on a roller coaster ever since. For the most part we have been rolling downhill, but the start of the fourth quarter has been pretty strong. And it is not only stocks gyrating wildly. Oil prices have been even more volatile this year. It is hard to believe that oil prices were in the $110 per barrel range last year. The decrease in oil prices of approximately 60 percent makes the volatility of stocks look like a pebble hitting the ocean.
Of course, several questions arise from what has happened this year. For one, will the gyrations continue? With regard to oil prices, the prevailing opinion is yes. We have a global economic slowdown at the same time Iranian oil is getting ready to hit the market. In years past, OPEC just throttled back production to keep oil prices stable. But this year they seem to be intent on hurting the U.S. shale oil business by supporting lower prices. On the other side of the coin, Russia’s involvement in the Middle East is throwing more fuel on a fire and this is causing oil to rebound in the short run.
The next question is–how do these gyrations factor into the Fed’s thinking as the Federal Reserve Board’s Open Market Committee meets next week and in December with only these two meetings remaining to meet their own prediction of raising rates sometime this year. As we have said before, the Fed does not like uncertainty. The weak September jobs report adds to this uncertainty and this is why the markets feel that the Fed will pass on rate increases, at least for October. If they do raise rates, it would surprise the markets and this would go against the Fed’s goal of making sure the markets are prepared for their next move. And that surprise would cause more volatility.
The Market Update
Rates on home loans bounced back in the past week after a sharp drop the week before. Freddie Mac announced that for the week ending October 15, 30-year fixed rates rose to 3.82% from 3.76% the week before. The average for 15-year loans increased as well to 3.03%. Adjustables were stable, with the average for one-year adjustables down one tick to 2.54% and five-year adjustables remaining at 2.88%.
A year ago, 30-year fixed rates were at 3.97%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “As the shock of the weak September employment report wore off, Treasury rates drifted higher. In response, the 30-year fixed rate climbed 6 basis points to 3.82 percent, marking 12 consecutive weeks below 4 percent. Late-breaking news suggests rates may remain in this territory a while longer. After this week’s survey closed, Federal Reserve Governor Daniel Tarullo was quoted suggesting the Fed may not act this year, and Wednesday the 10-year Treasury closed under 2.0 percent in reaction to economic releases indicating weak consumer demand.”
Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.