Market Update March 16

Market Update March 16

For the week of March 16, 2015 – Vol. 13, Issue 11>> Market UpdateQUOTE OF THE WEEK... "Genius, that power that dazzles mortal eyes, is oft but perseverance in disguise."--Henry W. Austin, American businessmanINFO THAT HITS US WHERE WE LIVE... Perseverance requires staying motivated, so here goes. Freddie Mac's March 2015 Economic & Housing Market Outlook was pretty optimistic. Their deputy chief economist said, "Overall, we're feeling good about housing and we expect this to be the best year for home sales and new home construction since 2007," when home sales hit 5.8 million. The reasons for Freddie's optimism include things like high affordability, improving labor markets, and rising rents. Fannie Mae's National Housing Survey reported that consumers who believe it would be easy to get a mortgage today jumped to a record high.Fannie's chief economist commented: "Continuing improvements in consumer attitudes...lend support to our expectation that 2015 will be a year of the economy dragging housing upward." That move has begun, as the Mortgage Bankers Association (MBA) Weekly Applications Survey showed purchase mortgage applications up 2% for the week. The MBA's Builder Application Survey for February had mortgage applications for new home purchases up 12% over January, with both months up year-over-year. Finally, a major investment bank reports that 93% of millennials want to own a home in the future; in fact, 70% consider it extremely important. BUSINESS TIP OF THE WEEK... Try to start and end every work day the same way. That can be with a workout, a walk, writing down a list of tasks, or reading a few passages from a book that inspires you. It frames the day with discipline. >> Review of Last WeekELEVATOR RIDE... Things have been pretty volatile on Wall Street the past few months, and last week's stock market performance fit right in. Equity prices went strongly up, then down, in reaction to the mixed economic reports, ending with a big bout of selling on Friday, which sent all three main market indexes firmly down for the third week in a row. There were two fails on Friday. February's Producer Price Index (PPI) registered a surprise dip and almost the whole decline was from prices for services. The second disappointment was a big drop-off in the preliminary Michigan Consumer Sentiment index for March, which hit a four-month low.The worst news of the week was the Retail Sales report for February, showing sales down 0.6%, wildly missing the 0.3% gain that was forecast. This is the third month in a row retail sales have dropped and they're now up just 1.7% compared to a year ago. On the jobs front, there was good and not-so-good news. Weekly Initial Unemployment Claims for March 7 dropped by 36,000, to 289,000. Good news. But the 4-week average only dipped by 3,750, to a 302,250 level, which is more than 10,000 above the figure a month ago. Analysts say this indicates there won't be any improvement in the March employment report. Not-so-good news.The week ended with the Dow down 0.6%, to 17749; the S&P 500 down 0.9%, to 2053; and the Nasdaq down 1.1%, to 4872.Some bonds rallied following Friday's disappointing economic data. But the 30YR FNMA 4.0% bond we watch finished the week down .01, to $106.13. National average fixed mortgage rates blipped slightly higher in Freddie Mac's Primary Mortgage Market Survey for the week ending March 12. This was the result of the prior week's positive jobs report, which sent rates back to their levels around the start of the year. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. DID YOU KNOW?... The millennial generation is made up of people born from 1980 to 2000. They are the largest generation in U.S. history. >> This Week’s Forecast HOME BUILDING MIXED, MANUFACTURING UP, ALL EYES ON THE FED... Economists expect mixed signals from home building, with February Housing Starts off and Building Permits up. But the annual rates for both should hold above one million units. At least the manufacturing reads are forecast up: the March Philadelphia Fed and New York Empire indexes, along with February U.S. Industrial Production and Capacity Utilization. All this makes for nice conversation, but the serious focus will be on the Fed's FOMC Rate Decision. The rate won't budge for now, but the new policy statement will be read VERY carefully for indications of whether it will start going up in June.>> 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 Mar 16 – Mar 20 DateTime (ET)ReleaseForConsensusPriorImpactMMar 1608:30NY Empire Manufacturing IndexMar8.87.8ModerateMMar 1609:15Industrial ProductionFeb0.3%0.2%ModerateMMar 1609:15Capacity UtilizationFeb79.5%79.4%ModerateTuMar 1708:30Housing StartsFeb1.040M1.065MModerateTuMar 1708:30Building PermitsFeb1.070M1.053MModerateWMar 1810:30Crude Inventories3/14NA4.512MModerateWMar 1814:00FOMC Rate Decision3/180%–0.25%0%–0.25%HIGHThMar 1908:30Initial Unemployment Claims3/14294K289KModerateThMar 1908:30Continuing Unemployment Claims3/72.420M2.418MModerateThMar 1910:00Philadelphia Fed IndexMar7.25.2HIGHThMar 1910:00Leading Economic Indicators (LEI)Feb0.2%0.2%Moderate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... The big guessing game on Wall Street is when this year will the Fed begin hiking the Funds Rate. Last week's disappointing Retail Sales numbers lowered expectations for a June start. Note: In the lower chart, a 3% probability of change is a 97% 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 19%


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