Market Update February 17

Market Update February 17

>> Market UpdateQUOTE OF THE WEEK... "Obstacles are those frightful things you see when you take your eyes off your goals." --AnonymousINFO THAT HITS US WHERE WE LIVE... Plenty of us must be keeping our eyes on our goals, because obstacles to the housing recovery keep fading away. Fannie Mae's January 2015 National Housing Survey reports 29% of respondents said their household income is significantly higher than it was 12 months ago, and 48% expect their financial situation to improve over the next year, both numbers all-time survey highs. The share who say now is a good time to buy a home grew to 67%. Fannie Mae's chief economist observed, "Consumers are as positive about their personal finances at the start of 2015 as they have been since we launched the Survey in 2010."That economist also noted, "the share [of consumers] who plan to own on their next move has jumped back up, reversing a three-month trend toward renting." The Mortgage Bankers Association (MBA) Builder Application Survey reported mortgage applications for new home purchases shot up 29% in January. Their VP of Research and Economics said, "On the strength of an improving labor market and low interest rates, January new home sales were up nearly 30% over December." In the MBA's Mortgage Applications Survey for the week ending February 6, the FHA share increased to 14.1%, thanks to lower FHA insurance premiums.BUSINESS TIP OF THE WEEK... Listening is more important than talking. Practice active listening, focusing your full attention on your customer or prospect. Don't interrupt, and watch for body language and other visual cues. >> Review of Last WeekDOWN MEANS UP... It seemed as if investors on Wall Street were following Alice Through the Looking-Glass, listening to the Red Queen proclaim down is up. Economic data trended down, while all three market indexes ended solidly up. By the end of festivities on Friday, the Dow finished above 18,000 for the first time this year, the tech heavy Nasdaq hit its highest level since March 2000, and the S&P 500 set a fresh closing record high. Investors felt good about oil price stabilizing after rising for a few weeks, were relieved to see France, Germany, Russia, and Ukraine strike a ceasefire agreement, and saw signs of resolution to the Greek financial mess.The down side of the story was all about the U.S. economy. Retail Sales were off 0.8% in January, their worst monthly read since 2009. Lower gas prices were blamed, but take them out of the equation and retail was still flat. Michigan Consumer Sentiment missed expectations, but some said that's OK as long as income keeps edging up. Weekly Initial Unemployment Claims grew by 25,000, slipping over the 300,000 threshold. Yet the four-week moving average dropped for a third straight week to a 289,000 level, about 10,000 lower than a month ago. Continuing Unemployment Claims dropped by 51,000, to 2.354 million.The week ended with the Dow UP 1.1%, to 18019; the S&P 500 UP 2.0%, to 2097; and the Nasdaq UP 3.1%, to 4894.Investor money flowed into stocks and out of bonds, sending prices southward. The 30YR FNMA 4.0% bond we watch finished the week down .02, to $106.24. For the week ending February 12, national average fixed mortgage rates edged up a little in Freddie Mac's Primary Mortgage Market Survey. But rates still remain near May 2013 lows. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. DID YOU KNOW?... Last week, Dallas Fed President Richard Fisher pointed out that for all the concerns about falling oil prices, total capital expenditures for oil and gas are only 1% to 2% of GDP. >> This Week’s Forecast MANUFACTURING AND HOME BUILDING UP AND DOWN, WHAT THE FED SAID... A mixed story is expected for manufacturing in February, with the New York Empire Index slipping but the Philadelphia Fed showing more expansion. Home builders are also forecast to be sending a mixed message, with January Housing Starts down, but Building Permits up. Wednesday we'll get FOMC Minutes from the Fed's last meeting. Economists are hoping they'll get more insight into when the Fed will pull the trigger on a rate hike. Stay tuned.The stock and bond markets close Monday, February 16, in observance of Presidents' Day. >> The Week’s Economic Indicator CalendarWeaker 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 Feb 16 – Feb 20 DateTime (ET)ReleaseForConsensusPriorImpactTuFeb 1708:30New York Empire Manufacturing IndexFeb9.09.9ModerateWFeb 1808:30Housing StartsJan1.070M1.089MModerateWFeb 1808:30Building PermitsJan1.065M1.032MModerateWFeb 1808:30Producer Price Index (PPI)Jan–0.4%–0.3%ModerateWFeb 1808:30Core PPIJan0.1%0.3%ModerateWFeb 1809:15Industrial ProductionJan0.4%–0.1%ModerateWFeb 1809:15Capacity UtilizationJan79.9%79.7%ModerateWFeb 1814:00FOMC Minutes1/28NANAHIGHThFeb 1908:30Initial Unemployment Claims2/14295K304KModerateThFeb 1908:30Continuing Unemployment Claims2/72.398M2.354MModerateThFeb 1910:00Philadelphia Fed IndexFeb9.86.3HIGHThFeb 1910:00Leading Economic Indicators (LEI) IndexJan0.3%0.5%ModerateThFeb 1911:00Crude Inventories 2/14NA4.868MModerate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... The economy keeps sputtering as it recovers, yet some economists still feel a rate hike may come as soon as June, although most expect one later in the year. Note: In the lower chart, a 4% probability of change is a 96% certainty the rate will stay the same.Current Fed Funds Rate: 0%–0.25%After FOMC meeting on:Consensus Mar 180%–0.25%Apr 290%–0.25%Jun 170%–0.25%Probability of change from current policy:After FOMC meeting on:Consensus Mar 18 0%Apr 29 4%Jun 17 22%


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