Market Update

 

>> Market Update

QUOTE OF THE WEEK… “Be so good they can’t ignore you.” –Steve Martin, American actor, writer, and musician INFO THAT HITS US WHERE WE LIVE… The housing market isn’t quite as good as Mr. Martin advises, but it’s a lot better than some media pundits would have us believe. Last week, one of the world’s leading independent macro-economic research companies gave its bullish assessment of the U.S. housing market and mortgage growth. Their property economist said that the weak August jobs report was “probably just an isolated blip.” He feels that “indicators such as initial jobless claims suggest that labor market conditions are still strengthening.” Jobs of course are key to the housing recovery. This economist noted that with the slower gain in home prices in Q2, values improved and mortgage affordability is very favorable. He observed that “45% of respondents to the Fed’s Senior Loan Officer Survey saw mortgage demand strengthen in the third quarter.” Echoing this, an accounting and management consulting firm reported that loan production among independent mortgage bankers increased in Q2 by 50% over the previous quarter, the first gain in the past three quarters. Finally, Fannie Mae’s August National Housing Survey found Americans’ attitude toward the future of the housing market is getting more positive. BUSINESS TIP OF THE WEEK… Successful businesses focus on helping their customers be better off. Thriving companies obsess over quality, service, and creating genuine customer value.

>> Review of Last Week

FEARING THE FED… It was another cautious week of trading on Wall Street, as investors feared the Fed may signal the start of interest rate hikes sooner than expected at their coming meeting. This time, positive attitudes did not prevail and all three major benchmarks scored their first weekly losses in six weeks. Sadly, the broadly based S&P 500 fell from the record highs it hit earlier in the week. Geopolitical jitters didn’t help either. Gaza and Ukraine were quieter, but worries continue, with the President ordering airstrikes on ISIL in Syria and Scotland contemplating breaking away from the U.K. There wasn’t a ton of economic data to chew on, but what there was came in pretty decent. August Retail Sales were up 0.6% overall and up a respectable 0.3% if you took out motor vehicle sales. This shows that consumers are opening their wallets to help the economy. It was no surprise then that the preliminary Michigan Consumer Sentiment reading for September hit its highest level since July 2013. Initial and Continuing Unemployment Claims edged up a tad, but Business Inventories were in line with expectations, increasing 0.4%. The week ended with the Dow down 0.9%, to 16988; the S&P 500 down 1.1%, to 1986; and the Nasdaq down 0.3%, to 4568.The OK economic data plus Fed fears sent bond prices south for the second week in a row. The 30YR FNMA 4.0% bond we watch finished the week down 1.01, to $104.27. National average mortgage rates edged up slightly in Freddie Mac’s Primary Mortgage Market Survey for the week ending September 11. Yet rates remain well below where they were a year ago. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.  DID YOU KNOW?… A new study found that about 20% of homeowners who would benefit from refinancing fail to do so, throwing away an average of approximately $11,500 in savings over the life of their loans.

>> This Week’s Forecast

INFLATION AND BUILDERS OK, FACTORIES HUM, WE WATCH THE FED… Inflation is expected to stay well within the Fed’s target range for both wholesale prices, measured by the Producer Price Index (PPI) and consumer prices, gauged by the Consumer Price Index (CPI). August Housing Starts are forecast off a smidge but Building Permits are up, as builders remain confident. And the New York Empire and Philadelphia Fed manufacturing indexes should still show expansion. The week’s big focus will be Wednesday’s FOMC meeting after which the Fed’s policy statement will be dissected to see if a rise in the Funds Rate will indeed come sooner than expected.

>> 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 15 – Sep 19

 Date

Time (ET)

Release

For

Consensus

Prior

Impact

M Sep 15

08:30

NY Empire Manufacturing Index

Sep

16.0

14.7

Moderate

M Sep 15

09:15

Industrial Production

Aug

0.3%

0.4%

Moderate

M Sep 15

09:15

Capacity Utilization

Aug

79.3%

79.2%

Moderate

Tu Sep 16

08:30

Producer Price Index (PPI)

Aug

0.0%

0.1%

Moderate

Tu Sep 16

08:30

Core PPI

Aug

0.1%

0.2%

Moderate

W Sep 17

08:30

Consumer Price Index (CPI)

Aug

0.0%

0.1%

HIGH

W Sep 17

08:30

Core CPI

Aug

0.2%

0.1%

HIGH

W Sep 17

10:30

Crude Inventories

9/13

NA

-0.972M

Moderate

W Sep 17

14:00

FOMC Rate Decision

9/17

0%-0.25%

0%-0.25%

HIGH

Th Sep 18

08:30

Initial Unemployment Claims

9/13

305K

315K

Moderate

Th Sep 18

08:30

Continuing Unemployment Claims

9/6

2.945M

2.487M

Moderate

Th Sep 18

08:30

Housing Starts

Aug

1.045M

1.093M

Moderate

Th Sep 18

08:30

Building Permits

Aug

1.054M

1.052M

Moderate

Th Sep 18

10:00

Philadelphia Fed Index

Sep

23.5

28.0

HIGH

F Sep 19

10:00

Leading Economic Industries (LEI)

Aug

0.4%

0.9%

Moderate

 

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months… The vast majority of economists believe the central bank will keep the Fed Funds Rate where it is, at least through the end of the year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%-0.25%

After FOMC meeting on:

Consensus

Sep 17

0%-0.25%

Oct 29

0%-0.25%

Dec 17

0%-0.25%

Probability of change from current policy:

After FOMC meeting on:

Consensus

Sep 17

     <1%

Oct 29

     <1%

Dec 17

     <1%

 This information was provided by Laurie Moore at Wallick & Volk Mortgage Lending. Laurie can be reached by phone at 928-778-7167 or e-mail at laurie.moore@wvmb.com


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