Market Update February 2

Market Update February 2

>> Market UpdateQUOTE OF THE WEEK... "Luck is what happens when preparation meets opportunity." --Elmer G. Leterman, American insurance broker and authorINFO THAT HITS US WHERE WE LIVE... Last week's December New Home Sales report showed there's plenty of opportunity in today's housing market. We saw new single-family home sales shoot up 11.6%, to an encouraging 481,000 annual rate, their highest level since June 2008, while sales were up 8.8% for the year. December's faster selling pace dropped the months' supply of new homes to 5.5 months, even as inventories increased by 5,000 units. But inventories remain low, so home builders have plenty of room to ramp up construction. The incentive should be there, with the median price of new homes sold up 8.2% from a year ago. The Pending Home Sales index was down 3.7% for December, but this National Association of Realtors (NAR) measure of contracts signed on existing homes is 6.1% up for the year. That's the fourth month in a row it's above year-over-year levels. The NAR chief economist added: "More jobs, increasing consumer confidence, less expensive mortgage insurance and new low down payment programs...will likely lead to more demand from first-time buyers." The November Case-Shiller Home Price Index was up 4.7% from a year ago, a solid gain, though smaller than the year before. Experts see more of the same in 2015, prices advancing at a slightly slower pace.BUSINESS TIP OF THE WEEK... Clients come back and refer you to others because of how you handled critical situations when everything seemed to be coming apart. Focus on the challenges; you don't earn points for how well you do routine processes. >> Review of Last WeekSTARTING IN REVERSE... Putting a car in reverse is how most people start out of a parking space at the mall, but that's not a good way for equity markets to begin a new year. Unfortunately, reverse is the direction stocks headed this January, the main market indexes ending with their largest monthly losses in a year, while seeing their fourth weekly drop out of the past five. Not helping things was the reverse direction the GDP reading took in Q4, showing the economy sliding to a tepid 2.6% annual growth rate from the 5.0% level it hit in Q3. But this is the Advanced Estimate and many economists say subsequent readings will be revised upward. Let's hope so. There were also a few disappointing corporate earnings reports to worry investors, along with continued concerns over deflation in the eurozone. But, hey, over here, Consumer Confidence came in at its highest level since 2007, while the Michigan Consumer Sentiment Index shot up from December to January. The Employment Cost Index also moderated in Q4, showing labor costs under control, keeping inflation in check, and the Chicago PMI registered more manufacturing growth in the Midwest. Initial Unemployment Claims fell mightily by 42,000 to 265,000, while Continuing Claims sank to 2.385 million.The week ended with the Dow down 2.9%, to 17165; the S&P 500 down 2.8%, to 1995; and the Nasdaq down 2.6%, to 4635.Stock market volatility, economic data disappointments, and continued global economic and political worries sent investors scurrying to the safe haven of bonds, pushing prices northward. The 30YR FNMA 4.0% bond we watch finished the week UP .77, to $107.05. Freddie Mac's Primary Mortgage Market Survey for the week ended January 29 showed national average fixed mortgage rates ticking up slightly. This was attributed to December's positive home sales reports. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. DID YOU KNOW?... The year 2014 had the fewest planned job cuts since 1997, with cuts in December dropping for the second month in a row. >> This Week’s Forecast INFLATION BENIGN, MANUFACTURING EXPANDING, JOBS PLOD ON... We have here another broad economic narrative, but analysts say it will sound like the same old story. Inflation in December, as measured by Core PCE Prices, the Fed's favorite gauge, is expected to flatline again. The January ISM Index of manufacturing is forecast to show that sector growing a little slower, clearly not taking off. This all-too-familiar picture of a plodding economy should be completed with Friday's January Employment Report delivering more than 200,000 new Nonfarm Payrolls for another month, a nice enough number, though not the 300,000 plus we need for a solid recovery. >> 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 2 – Feb 6 DateTime (ET)ReleaseForConsensusPriorImpactMFeb 208:30Personal IncomeDec0.3%0.4%ModerateMFeb 208:30Personal SpendingDec–0.2%0.6%HIGHMFeb 208:30Core PCE PricesDec0.0%0.0%HIGHMFeb 210:00ISM IndexJan54.755.1HIGHWFeb 410:00ISM Services IndexJan56.556.5ModerateWFeb 410:30Crude Inventories1/31NA8.874MModerateThFeb 508:30Initial Unemployment Claims1/31290K265KModerateThFeb 508:30Continuing Unemployment Claims1/242.375M2.385MModerateThFeb 508:30Trade BalanceDec–$38.0B–$39.0BModerateThFeb 508:30Productivity – PrelimQ40.2%2.3%ModerateThFeb 508:30Unit Labor Costs Q41.2%–1.0%ModerateFFeb 608:30Average WorkweekJan34.634.6HIGHFFeb 608:30Hourly EarningsJan0.3%–0.2%HIGHFFeb 608:30Nonfarm PayrollsJan235K252KHIGHFFeb 608:30Unemployment RateJan5.6%5.6%HIGH >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... With respect to raising the Funds Rate, the Fed doesn't appear eager to step on the gas, judging by the policy statement from last week's FOMC meeting. Many economists don't see a rate hike until the second half of the year. Note: In the lower chart, the probability of change is rated "Low" if few economists think the rate will rise, "Moderate" or "High" if more think it will go up.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 LowApr 29 LowJun 17 Moderate


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Dated: February 2nd 2015
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About Ralph and Karen: THE CHIODO TEAM - Ralph Chiodo Broker / Owner 610-792-4800 x 111 K...

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