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Stocks rise based on latest Fed comments, as Powell signals slowdown of Federal Reserve interest rate increases – US economy grows in third quarter – Mortgage rates drop for the 3rd straight week
US stock futures rose on Thursday following comments from Federal Reserve chair Jerome Powell that indicate a slowing in the pace and magnitude of interest rates.
The S&P 500 and the technology-heavy NASDAQ composite ticked up slightly by roughly 0.2% early on Thursday, while the Dow Jones industrial average was breakeven, Yahoo Finance reported.
However, the US dollar index dipped to a three-month low. The greenback tumbled as much as 1.64% to 135.85 yen, its lowest level since August 23, but then recovered a little to 136.20, CNBC reported.
The benchmark US 10-year Treasury dipped -0.107% to a yield of 3.594%, a near two-month low.
The US economy grew at a faster pace than expected in the third quarter, as the latest gross domestic product (GDP) report shows an increase in the annualized rate of 2.9%, CNN reported. It marks a significant turnaround from a contraction of 1.6 percent in the first quarter and 0.6 percent in the second quarter.
Federal Reserve Chairman Jerome Powell said on Wednesday the Fed is approaching its estimated peak in benchmark interest rates, signaling the next rate hike will be a 50-basis point increase in December rather than 0.75% as it has done at each of its last four meetings, Yahoo Finance reported. Currently, at the target range of 3.75%-4%, the Fed’s benchmark interest rate is at the highest level since 2007.
“I don’t want to overtighten,” Powell said, “[but] cutting rates is not something we want to do soon. So that’s why we’re slowing down and will try to find our way to what that right level is.”
“It is likely that restoring price stability will require holding policy at a restrictive level for some time,” Powell continued. “History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.”
The average interest rate for 30-year fixed-rate mortgages decreased last week to 6.49% from 6.67% (for those with conforming loan balances ($647,200 or less).
Just over a month ago, mortgage rates soared to over 7 percent. Since then, they have fallen more than half a percentage point.
While mortgage applications to purchase a home actually gained 4% from the previous week, demand decreased, coming in 41% lower than the same week one year ago, as sales of existing homes decline, continuing to signal a housing market decline overall, CNBC reported.
