Market Update May 2015

Market Update May 2015

>> Market UpdateQUOTE OF THE WEEK... "I never think of the future. It comes soon enough"--Albert Einstein, German-born theoretical physicistINFO THAT HITS US WHERE WE LIVE... Never thinking of the future may be fine for a theoretical physicist, but in the housing market we need to think about where things are heading. Fannie Mae's National Housing Survey for April showed us some nice improvement in consumer sentiment. The share of those surveyed who said they'd prefer to buy a home if they moved grew to 63%. Fannie's chief economist further noted that "home price growth expectations strengthened to the strongest pace since last October." But the survey also revealed continued consumer caution about economic conditions, so Fannie expects that "2015 will be a year of modest growth in housing activity."Whether growth winds up modest or not, housing activity is moving ahead nicely for now. The Mortgage Bankers Association Applications Survey for the week ending May 1 reports the seasonally adjusted Purchase Index up 1%, to its highest level since June 2013. Unadjusted, it was up 12% over the same week a year ago. Analysts say rising employment rates and solid home values are boosting the market. Values continued to grow according to a major data aggregator, who reported home prices in March were up 2% monthly and up 5.9% over a year ago. It was the 37th month in a row of annual price gains. Prices were at or within 10% of peak levels in 27 states and D.C. BUSINESS TIP OF THE WEEK... Always have in mind a clear idea of what it is you uniquely offer and why someone should pay for it. This focuses you on the value you deliver and sharpens your competitive edge. >> Review of Last WeekFAB FRIDAY... Last Friday was indeed a fabulous day on Wall Street as the stock market surged on what investors saw as good news. In the UK general election, conservatives won a surprising majority in Parliament for the first time since 1997. This put investors in a good mood, boosted further by the April Employment Report, whose 223,000 new Nonfarm Payrolls beat expectations, dropping the Unemployment Rate from 5.5% to 5.4%. The fabulous stock run-up ended with the Dow and S&P 500 ahead for the week, while the Nasdaq held its own. April's payroll gain was even more dramatic in light of the fact that March's original weak number was revised down to an even weaker 85,000 jobs. A big negative in the jobs report was the lackadaisical wage growth. Average Hourly Earnings were up a measly 0.1% in April, after being revised down to a 0.2% gain in March. But this was a positive on Wall Street, since poor growth in wages can be used as an argument for the Federal Reserve to keep interest rates low for a longer period of time. Low interest rates are also nice for housing, which saw more good news with 45,000 new construction payrolls in April. That's one of the biggest monthly gains in the recovery and should signal more new home construction this spring. ISM Services showed that sector expanding nicely, but Productivity was down 1.9% in Q1.The week ended with the Dow UP 0.9%, to 18191; the S&P 500 UP 0.4%, to 2116; and the Nasdaq flat (down 1 point), at 5004.Bonds held their own in spite of Friday's rally in stocks, as the April Employment Report was interpreted as weak data by bond traders. The 30YR FNMA 4.0% bond we watch finished the week UP .05, to $106.27. National average fixed mortgage rates for the week ending May 7 moved slightly higher in Freddie Mac's Primary Mortgage Market Survey. The nudge up was put to rising Treasury yields, the big March trade deficit and contraction in the ISM index for factory jobs. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. DID YOU KNOW?... In Fannie Mae's April survey, the share of respondents who think the economy is on the right track fell 1%, to 42%, while those who think it's on the wrong track grew 1%, to 49%. >> This Week’s Forecast RETAIL SALES GAIN, MANUFACTURING OK, INFLATION TEPID... The biggest read of the week will be April Retail Sales, forecast up a bit overall, though less than the prior month's gain. When you exclude volatile auto sales, the report is expected to show a little more growth. Manufacturing should be expanding, both in the region measured by the New York Empire Manufacturing Index, and nationally, as Industrial Production edges into positive territory after last month's decline. The Producer Price Index (PPI) is forecast to reveal wholesale price inflation remains under control.>> 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 May 11 – May 15 DateTime (ET)ReleaseForConsensusPriorImpactTuMay 1214:00Federal BudgetApr$155.0B$106.9BModerateWMay 1308:30Retail SalesApr0.2%0.9%HIGHWMay 1308:30Retail Sales ex-autoApr0.4%0.4%HIGHWMay 1310:00Business InventoriesMar0.2%0.3%ModerateWMay 1310:30Crude Inventories5/9NA–3.882MModerateThMay 1408:30Initial Unemployment Claims5/9275K265KModerateThMay 14 08:30Continuing Unemployment Claims5/22.300M2.228MModerateThMay 1408:30Producer Price Index (PPI)Apr0.2%0.2%ModerateThMay 1408:30Core PPIApr0.1%0.2%ModerateFMay 1508:30NY Empire Manufacturing IndexMay4.0–1.2ModerateFMay 1509:15Industrial ProductionApr0.1%–0.6%ModerateFMay 1509:15Capacity UtilizationApr78.4%78.4%ModerateFMay 1510:00Univ. of Michigan Consumer SentimentMay96.095.9Moderate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... Fewer economists now think the Fed will begin raising rates any time soon. Of course no one knows for sure, not even the Fed. Note: In the lower chart, a 7% probability of change is a 93% certainty the rate will stay the same.Current Fed Funds Rate: 0%–0.25%After FOMC meeting on:Consensus Jun 170%–0.25%Jul 290%–0.25%Sep 170%–0.25%Probability of change from current policy:After FOMC meeting on:Consensus Jun 17 0%Jul 29 7%Sep 17 22%


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Dated: May 11th 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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