June 1 Market Update

Dated: 06/01/2015

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>> Market Update QUOTE OF THE WEEK... "The first and most important step toward success is the feeling that we can succeed."--Nelson Boswell, American authorINFO THAT HITS US WHERE WE LIVE... We certainly should have the feeling we'll succeed after last week's housing reports. April Pending Home Sales rose for the fourth month in a row, to the highest level since 2006. This National Association of Realtors (NAR) index of signed contracts on existing homes was up 3.4% for the month, and 14.0% over a year ago, its eighth month in a row of annual increases. Realtor.com's chief economist said, "All this bodes well for continued momentum into May and June." The NAR's chief economist added, "Homeowners looking to sell this spring appear to be in the driver's seat, as there are more buyers competing for a limited number of homes available."Earlier in the week, we learned New Home Sales came in at a 517,000 annual rate, up 6.8% for April and up a strong 26.1% over a year ago. But just like with existing homes, demand is outstripping inventory, with new homes down to a 4.8 months' supply. The tight number of total homes for sale is at least helping prices move ahead, although at a slower pace. The national Case-Shiller national index of home prices was up 1% in March and up 4.1% in the past year, versus the 9% gain of the year before. The FHFA index of prices for homes financed with conforming mortgages was up 0.3% for March and up 5.2% over a year ago versus its 6.3% annual gain the year before.BUSINESS TIP OF THE WEEK... Spend less time with strangers and more time with fans. Keep making new contacts, but your biggest source of new business will come through people who already know how terrific you are. >> Review of Last Week NAUGHTY WEEK, NICE MONTH... Stock prices misbehaved during the holiday-shortened trading week, as investors sold off holdings amidst a spate of reports showing the economy isn't behaving too well either. The three major stock indexes suffered weekly losses, but, hold on, their performances for the month were actually quite nice. The blue-chip Dow and the broadly-based S&P 500 were up about 1% for May, while the tech-y Nasdaq hiked up a very nice 2.6%. As we know, last week's negative vibes on Wall Street were not created by the terrific housing market reports, but beyond those upside surprises, there wasn't much to get excited about.The parade of downers began Tuesday as Durable Goods Orders greeted us with a 0.5% drop for April. This kind of business investment is now down 2.3% from a year ago. The really bad stuff came Friday when we got a trifecta of disappointing reads. 1) Q1 GDP was revised downward to show the economy contracting -0.7% the first three months of the year. Observers hope this was just the result of bad weather and a West coast dock strike. 2) The Chicago PMI dropped below 50 for the third time in four months, indicating contraction in Midwest manufacturing. 3) Michigan Consumer Sentiment slipped from April to May. But hey, Greece now says it will make its June 5th loan payment. Woo-hoo!The week ended with the Dow down 1.2%, to 18011; the S&P 500 down 0.9%, to 2107; and the Nasdaq down 0.4%, to 5070.The disappointing economic data sent investors scurrying to the safe haven of bonds. The 30YR FNMA 4.0% bond we watch finished the week UP .10, at $106.25. However, national average fixed mortgage rates moved higher in Freddie Mac's Primary Mortgage Market Survey for the week ending May 28. This put rates at their highest level of the year, but they're 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?... The NAR forecasts total existing home sales in 2015 will be around 5.24 million, a 6.1% increase over 2014. >> This Week’s Forecast INFLATION, CONSUMER SPENDING, MANUFACTURING, JOBS ALL OK... Lots of economic data this week, and many analysts expect it to be good though not great. Core PCE Prices should show inflation up a little more in April, which is what the deflation-fearing Fed wants to see. Personal Spending is growing, but not as much as the month before. The ISM Index of manufacturing is predicted to keep gaining in May. As always, the monthly jobs report will be the biggie. Although no more than a modest 225,000 Nonfarm Payrolls are forecast to be added in May, economists think Hourly Earnings will come in a bit stronger, another positive sign.>> 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 1 – June 5 DateTime (ET)ReleaseForConsensusPriorImpactMJun 108:30Personal IncomeApr0.3%0.0%ModerateMJun 108:30Personal SpendingApr0.2%0.4%HIGHMJun 108:30Core PCE PricesApr0.2%0.1%HIGHMJun 1 10:00ISM IndexMay51.951.5HIGHWJun 308:30Trade BalanceApr-$44.0B-$51.4BModerateWJun 310:00ISM ServicesMay57.157.8ModerateWJun 310:30Crude Inventories5/30NA-2.802BModerateWJun 314:00Fed's Beige BookJunNANAModerateThJun 408:30Initial Unemployment Claims5/30280K282KModerateThJun 4 08:30Continuing Unemployment Claims5/232.215M2.222MModerateThJun 408:30Productivity - Rev.Q1-2.9%-1.9%ModerateThJun 408:30Unit Labor Costs - Rev.Q15.9%5.0%ModerateFJun 508:30Average WorkweekMay34.534.5HIGHFJun 508:30Hourly EarningsMay0.2%0.1%HIGHFJun 508:30Nonfarm PayrollsMay225K223KHIGHFJun 508:30Unemployment RateMay5.4%5.4%HIGH >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... Fewer economists think the Fed will start hiking rates in September, even though central bank chair Janet Yellen recently said they're ready to act, depending on the data. Note: In the lower chart, a 6% probability of change is a 94% 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 5%Sep 17 23%

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Ralph and Karen Chiodo

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....

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