Heading into last week, we expected to be waiting until after the holiday weekend to get a better sense of the prevailing tone in financial markets. If the week of April 7-11 represent tariff-driven panic, last week offered some hope that markets could stabilize in response to a more measured approach from the Trump administration. Those hopes were already looking tenuous last Thursday as Trump unleashed a barrage of criticism at Fed Chair Powell, ultimately suggesting could remove Powell if so desired. Global markets don’t love this narrative, and traded that fact overnight with weakness in the U.S. Dollar, stocks, and longer-term bonds. As Trump doubles down on his anti-Powell rhetoric this morning, stocks are swooning enough to help bonds recover back near unchanged levels.  The just-reported failure to reach a trade deal with Mexico (as well as a conspicuous absence of any major trade deals) is further contributing to the stock market swoon.

In the 1980s I fell off my bike and hurt my knee. I’m telling you this now because we didn’t have social media then. It doesn’t take social media to know that the S&P 500 is down 10 percent for the year, but fortunately “the stock market is not the economy.” As lenders and vendors everywhere focus on people, processes, and technology in trying to help their clients, on a broader scale, things have turned south. The benchmark S&P 500 index has now notched seven negative weeks out of nine, as tariff developments continue to sour sentiment. After several, sometimes confusing, adjustments and clarifications to tariff policy in recent weeks, things were quieter on that front last week. Lenders working with builders took note of one builder’s comments. “This year’s spring selling season started slower than expected, as potential homebuyers have been more cautious due to continued affordability constraints and declining consumer confidence,” Paul Romanowski, CEO of D.R. Horton, the largest homebuilder in the country, said on the recent earnings call. (Today’s podcast can be found here and this week is sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s core products unite the people, systems, and stages of the mortgage process. Hear an interview with Planet Home’s Mike Dubeck on managing a company through market cycles and driving business through technology investments.) Software, Products, and Services for Lenders and Brokers

Last week was a hopeful one for interest rates.  The average top tier 30yr fixed mortgage rate fell more than 0.20% from the previous week’s highs as underlying markets took some solace in the absence of major trade war escalations. Despite the solid improvement, the outright level of rates remained elevated compared to most of the past 2 months. In addition, the risk of volatility could not (and cannot) be ruled out when the market is more willing to react to fiscal policy headlines than economic data. The latest headlines involve heavy criticism of Fed Chair Powell on the part of The President. Without any comment on whether that criticism is justified, we can still observe that markets find it unsettling. Traders are expressing that sentiment by pushing stocks lower and rates higher. Mortgage rates jumped fairly sharply today, with the average lender moving up from 6.87% to just under 7.00% for top tier 30yr fixed scenarios.

Unfortunate Market Movement For Unfortunate Reasons

Global financial markets partook in a slow motion train wreck on Monday as investors shunned USD-denominated assets and the dollar itself in response to Trump’s vocal criticism of Fed Chair Powell.  The criticism itself wouldn’t be too tough to deal with, but the prospect of “firing” the Fed Chair seems to figure much more prominently into this edition of Trump vs Powell than it did during Trump’s previous term.  In not so many words, this would be “bad” for both stocks and bonds.  Today wasn’t catastrophic by any means, but the correlated weakness between stocks, bonds and the USD is an important proof of concept. 

Econ Data / Events

Leading Indicators

-0.7 vs -0.5 f’cast, -0.3 prev

Market Movement Recap

10:13 AM Weaker overnight, but pushing back since 8am ET.  MBS down just over an eighth and 10yr up 3bps at 4.355

12:35 PM Nice gains into 1030am, but weaker since then.  MBS now down 9 ticks (.28) and 10yr up 5.1bps at 4.377

01:44 PM weakest levels of the day for MBS with 5.5 coupons down 13 ticks (.41) and 10yr up 7.4bps at 4.40

04:00 PM More new lows.  MBS down half a point and 10yr up 9.2bps at 4.419

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Even with various tariff pauses and exemptions, suppliers are raising prices due to ongoing policy uncertainty, and consumers also are altering their behavior.

The state and local tax deduction is a write-off that most Americans will never claim, even in the districts of the lawmakers fighting hardest to increase the tax break, data analyzed by Bloomberg News shows.

Even after posting production losses in two of four quarters last year, independent mortgage bankers made $443 on every loan originated during 2024.

Nearly a quarter of home sellers in March slashed their listing prices, the highest rate of price cutting since 2018 according to a Zillow report.

One would think that the pace of new residential construction largely mirrors the pace of filings for building permits. And while that is generally true in the bigger picture, there can be noticeable discrepancies month to month. This week’s data from the Census Bureau is the latest example. Building permits were slightly higher at 1.482 million units (annual pace) versus 1.459 million previously. Contrast that to housing starts (the term for the ground-breaking phase of home construction) which fell to 1.342 million from 1.494 million previously. This excess volatility in housing starts can be seen in the following chart with the blue line whipping higher and lower many times over the past few years while the orange line remains relatively more steady. There was a heavy regional skew to the housing starts numbers with two regions moving higher and two moving lower as follows:
Northeast

+2k starts (+1.4%)

Midwest

+96k starts (+76.2%)

South

-139k starts (-17.1%)

West

-129k starts (-30.9%)

Note: the count of housing starts account for a different percent change depending on the overall activity level in the region.  For example, starts declined more in the South than in the West, but the percent change was much lower because the South had a total level of 524k versus only 289k in the West. If you’re thinking that all of the above sounds pretty boring and/or you’re wondering why it even matters, you’re right.  Home construction data is pretty boring–just a slow, steady grind until something big starts happening.