The last 2 weeks have mostly uneventful from a market news standpoint, but rates…
>> Market Update
QUOTE OF THE WEEK… “You can go as far as your mind lets you. What you believe, remember, you can achieve.” –Mary Kay Ash, American businesswoman
INFO THAT HITS US WHERE WE LIVE… Our minds must believe things are looking pretty good, as last week saw the housing market achieve a very nice reading. The National Association of Realtors (NAR) Pending Home Sales index for July was up 1.3% over June, 1.4% higher than a year ago, registering its second highest reading this year. This is a measure of contracts signed on existing homes, so NAR analysts see those closings picking up in the Fall, driving a strong finish to the year. The current NAR forecast is for a 2.8% jump in existing home sales for 2016, to 5.38 million units. That’s what the NAR believes we can achieve.
Another nice read came when the Mortgage Bankers Association reported that for the week ending August 26, mortgage applications rose 2.8%. And it wasn’t just from people refinancing–purchase applications were up 1%. June’s Case-Shiller Home Price index held the annual increase at 5.1%. The Index Committee’s chairman feels, “Overall, residential real estate and housing is in good shape.” Wall Street agrees. Thursday, the S&P 500 stock index gave real estate its own industry sector. Real estate stocks had been lumped with banks and insurance firms, but they’re now a bigger player, accounting for 3.5% of the global equities market.
BUSINESS TIP OF THE WEEK… Closing a sale takes ENTHUSIASM. Remember this acronym from the last four letters of that word–IASM–I Am Sold Myself. If you are, you’ll probably make the deal.
>> Review of Last Week
JOBS FAIL, STOCKS SAIL… Friday’s jobs report was disappointing. Only 151,000 nonfarm payrolls were added in August. This is basically no job growth, since economists say we need 150,000 new jobs per month just to keep up with population gains. Wage growth disappointed too, hourly earnings up only 0.1%, leaving the 2.4% annual rate heading in the wrong direction, down from 2.6% in July.Jobs failed, but stocks sailed, as investors felt the report was bad enough to keep the Fed from hiking rates later this month. Wall Street likes low rates because they mean cheaper borrowing costs for U.S. companies and they keep things moving in the housing market.
Of course it would be best to see strong economic growth, but for the last eight years, the economy has been lackluster at best. Instead of well-paying jobs, we get a mixed bag of data. Last week’s batch included Personal Income up a tick in July, good because consumers need to make more in order to spend more to help the economy. But Productivity dropped to a -0.6% annual rate in Q2 and is -0.4% versus last year. The ISM Index, at 49.4, showed manufacturing activity contracted in August, its biggest one-month decline in more than two years. Ending on an up note, exports rose and imports declined in July, driving the Trade Deficit down to $39.5 billion.
The week ended with the Dow UP 0.5%, to 18492; the S&P 500 UP 0.5%, to 2180; and the Nasdaq UP 0.6%, to 5250.
In spite of the disappointing jobs report, bond investors were worried enough about a September rate hike to sell off longer-dated Treasuries, sending prices down and yields up. But the 30YR FNMA 4.0% bond we watch finished the week UP .06, at $107.09. Freddie Mac’s Primary Mortgage Market Survey for the week ending September 1 showed national average 30-year fixed mortgage rates edging slightly higher, though still near historical lows. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?… Hispanics accounted for 69% of the total net growth in homeownership in 2015, yet they make up a little more than 17% of the the U.S. population.
>> This Week’s Forecast
SERVICES SECTOR SLIPS, FED’S BEIGE BOOK TELLS REGIONAL TALES… Summer vacations may be over, but there won’t be much economic data to work through this week. The ISM Services index for August is expected to drop, yet remain above 50, showing that sector of the economy is still slowly expanding. Additional interest may be found in the Fed’s Beige Book. This contains economic surveys from Federal Reserve Districts across the country, which could influence the Fed’s rate decision in a couple of weeks..
U.S. stock and bond markets were closed yesterday in observance of the Labor Day holiday.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Sep 5 – Sep 9
|14:00||Fed’s Beige Book||Sep||NA||NA||Moderate|
|08:30||Initial Unemployment Claims||9/3||265K||263K||Moderate|
|08:30||Continuing Unemployment Claims||8/27||NA||2.159M||Moderate|
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… Most economists see no movement in rates through the next two Fed meets, but a very slim majority expects a 0.25% bump come December.Note: In the lower chart, a 21% probability of change is a 79% certainty the rate will stay the same.
Current Fed Funds Rate: 0.25%-0.5%
|After FOMC meeting on:||Consensus|
Probability of change from current policy:
|After FOMC meeting on:||Consensus|