Will 1st quarter 2018 be the best of the year?

Last week mortgage rates held their ground despite some mid-week volatility; ending the week about where we started.  Domestically, economic indicators are in line with expectations but not on fire.  GDP came in a little higher than expectations at 2.3%. Monday, PCE showed inflation at 2.00%; which right in line with the Fed’s target. Globally the economic indicators are not as strong.  The European Central Bank coming in soft delaying any monetary tightening plans and keeping their Fed rate at 0%.

Caterpillar rocked the markets on Tuesday calling its strong first quarter earnings the “high water mark” for the year due to rising costs.  So while their earnings were strong, they expect that 1^st quarter will be the best of the year.  The news caused a ripple effect in the stock market and lost 1.7% that day, This despite more than 80% of companies reporting earnings and most analysts showing 1^st quarter earnings coming in overall at 22% growth.   It leads me to wonder if 1^st quarter 2018 could be the “high water mark”.  They say hindsight is 20/20- The problem with all this data we look at is that it is history. 

Housing news: March construction spending down -1.7% vs. estimate of a .50% increase.  More evidence our housing supply issue won’t be solved anytime soon.  

Here is what to watch this week:

1. Tomorrow the FOMC releases its report, not likely they will raise the Fed rate until next meeting in June, if at all- but we are looking at the language in the report for indication of the outlook for growth and inflation. 
2.  Friday we get the jobs data- looking mainly at average hourly wages, currently 2.7%, any move higher is inflationary and negative for mortgage bonds.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.