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Market Update June 6
>> Market Update QUOTE OF THE WEEK... "I believe in numbers and signs."--Vikram Chatwal, American hotelier and former actor INFO THAT HITS US WHERE WE LIVE... We saw some numbers last week that were signs causing us to believe the housing market continues to improve. With the exceptionally cold and snowy winter weather finally over, construction spending rebounded smartly in April, gaining 2.2% for the month, and 4% when you include upward revisions to the prior month. Overall construction spending hit its highest annual pace in more than six years, as a 0.6% surge in residential building was supported by heightened commercial and public activity. Although down for the week, the Mortgage Bankers Association's unadjusted Purchase Index was 14% higher than a year ago. One of the most interesting signs of all came from a real estate information company's Home Purchase Down Payment Report. They said the average down payment in the first quarter fell to 14.8% of the purchase price, down from the prior quarter, as well as down from a year ago. Their vice president believes this is a sign that "first time homebuyers are finally starting to come out of the woodwork, albeit gradually." Finally, a real estate tech and data firm reported home prices in April up 2.7%, month over month, and up 6.8%, year over year. While prices continue gaining, which is good for sellers, the rate of those gains is moderating, which is good for buyers. BUSINESS TIP OF THE WEEK... Many believe the key to success is to define the unique value you bring to your customers. Then, make sure to demonstrate that value in everything you do for them. >> Review of Last Week ALL ABOUT THE JOBS... To Wall Street investors, last week was all about the jobs report. May saw 280,000 new Nonfarm Payrolls added, the most in five months, plus an unexpectedly strong gain in wages, with Average Hourly Earnings up 0.3%. Also encouraging, payroll gains were broadly based, in professional and business services, healthcare, and leisure sectors, not just lower level McJobs. The Unemployment Rate edged up to 5.5%, but this was wholly the result of more people rejoining the labor force, a good thing. Investors felt positive about these signs of a stronger economy, but they also worried the Fed would hike rates sooner. So the three major stock indexes finished the week slightly down.The jobs people have are indeed paying better, as Personal Income was up in April and is up 4.1% the past year. Consumers weren't yet shelling out that extra dough, as Personal Spending was flat in April, though up 2.8% for the year. Things improved in May, with cars and light trucks selling at a 17.8 million annual rate, the best since 2005. The ISM Index of manufacturing grew more than expected for the month and ISM Services also showed growth, although at a slower pace than the month before. But the week wouldn't be normal without some down data. Q1 Productivity answered the call, declining at a 3.1% annual rate, though this was all put to the harsh winter and the West coast dock strikes. OK. The week ended with the Dow down 0.9%, to 17849; the S&P 500 down 0.7%, to 2093; and the Nasdaq down just 2 points, to 5068.Friday's decent May Employment Report hammered bond prices, as traders fled the market, fearing rate hikes from the Fed. The 30YR FNMA 4.0% bond we watch finished the week down 1.02, at $105.23. This happened too late to affect Freddie Mac's Primary Mortgage Market Survey for the week ending June 4, which reported national average fixed mortgage rates unchanged. They're at a high for the year, but 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?... A 1% increase in mortgage rates can reduce affordability--in other words, buying power--by 10%. >> This Week’s Forecast RETAIL, CONSUMER SENTIMENT, WHOLESALE PRICES ALL POP... Analysts expect to see May Retail Sales go up nicely over all, as well as when you exclude auto sales, which are volatile month-to-month. After consumers spent enthusiastically at retail in May, the University of Michigan Consumer Sentiment index predicts they'll feel better in June. The Producer Price Index (PPI) is also forecast up a bit in May. This measure of wholesale price inflation will make the Fed happy, but could sadden the rest of us if consumer prices follow suit. >> 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 June 8 – June 12 Date Time (ET) Release For Consensus Prior Impact W Jun 10 10:30 Crude Inventories 6/6 NA -1.948M Moderate W Jun 10 14:00 Federal Deficit May NA -$130.0B Moderate Th Jun 11 08:30 Initial Unemployment Claims 6/6 278K 276K Moderate Th Jun 11 08:30 Continuing Unemployment Claims 5/30 2.200M 2.196M Moderate Th Jun 11 08:30 Retail Sales May 1.1% 0.0% HIGH Th Jun 11 08:30 Retail Sales ex-auto May 0.7% 0.1% HIGH Th Jun 11 10:00 Business Inventories Apr 0.2% 0.1% Moderate F Jun 12 08:30 Producer Price Index (PPI) May 0.5% -0.4% Moderate F Jun 12 08:30 Core PPI May 0.1% -0.2% Moderate F Jun 12 10:00 Univ. of Michigan Consumer Sentiment Jun 91.5 90.7 Moderate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... The pendulum swings. Now, a few more economists think the Fed will start hiking rates in July, and even more say it could happen in September. Note: In the lower chart, an 8% probability of change is a 92% certainty the rate will stay the same.Current Fed Funds Rate: 0%–0.25%After FOMC meeting on: Consensus Jun 17 0%-0.25% Jul 29 0%-0.25% Sep 17 0%-0.25% Probability of change from current policy:After FOMC meeting on: Consensus Jun 17 0% Jul 29 8% Sep 17 31%
THE CHIODO TEAM - Ralph Chiodo Broker / Owner 610-579-9514 Karen Chiodo Realtor / Owner 610-579-9514 Together Ralph and Karen (and their dedicated Team) have success....