Overview: The coronavirus continued to be the focus of investors over the past week. While the stock market rallied, daily volatility in mortgage markets remained low, and rates again ended the week with little change.

On Wednesday, the Federal Reserve said that the U.S. economy has slowed due to the coronavirus pandemic and that it is “committed to using its full range of tools” to provide support. The Fed expects to hold the federal funds rate near zero until target levels for employment and inflation are achieved. To help stabilize markets, the Fed has been buying large quantities of bonds in recent weeks, but no additional guidance was provided about the pace of future purchases.

Due to the coronavirus, first-quarter gross domestic product (GDP), the broadest measure of economic growth, fell by 4.8%. This followed an increase of 2.1% in the fourth quarter and was the weakest reading since 2008. Consumer expenditures, which make up about two-thirds of total GDP, dropped 8% as nonessential stores were closed for part of the quarter.

Filings for new jobless claims dropped to 4.4 million this week, down from 5.2 million last week, but still far above the weekly claims around 250,000 that were typical before the outbreak of the pandemic. The U.S. labor market has lost 26.5 million workers, more than 16% of the workforce, over the past five weeks.

Week Ahead

Looking ahead, investors will be watching for news about medical advances to fight the pandemic, Fed actions, government fiscal stimulus programs, and plans for gradually reopening the economy. In addition, the next European Central Bank meeting will take place on Thursday, and investors will be looking for its assessment of the economic impact of the pandemic. The Institute for Supply Management (ISM) Manufacturing Index will be released on Friday, followed by the ISM Services Index on Monday.

GDP Growth (% change)