Capping off a nice start to the year

HELLO, 14,000… Capping off a nice start to the year, stocks registered a fifth week of gains that took the Dow Jones Industrial Average north of 14,000 for the first time since the fall of 2007. The broadly-based S&P 500 index wasn’t too shabby either, ending the week above 1500. Investors appear to be upbeat on the economy even though the signals remain mixed. A prime example was the January Employment Report, with a lower than expected number of new jobs created, but solid upward revisions made to December and November.

Nonetheless, the unemployment rate drifted back up again, to 7.9%.  Mixed messages continued, with Durable Goods orders, the Chicago PMI manufacturing index, and Michigan Consumer Sentiment all nicely beating expectations. Yet the Consumer Confidence reading missed expectations by a lot and the Advanced GDP estimate for Q4 showed economic growth diminishing at a –0.1% annual rate. This was the first time GDP went negative since 2009, but it didn’t seem to bother investors one bit.

The week ended with the Dow UP 0.8%, to 14010; the S&P 500 UP 0.7%, to 1513; and the Nasdaq UP 0.9%, to 3179.

With stocks heading higher, investors moved out of bonds, sending prices lower and yields and mortgage rates up. The FNMA 3.5% bond we watch ended the week down .06, at $105.12. Freddie Mac’s Weekly Survey showed national average mortgage rates continuing to edge higher, although still in very attractive territory. The Mortgage Bankers Association reported purchase loan applications up 6.2% from the week before, increasing for the fifth week in a row and now almost 10% above where they were last year.

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