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Market Update August 8 2016
>> Market Update
QUOTE OF THE WEEK... "You can do anything, but not everything." --David Allen, American productivity consultant and author
INFO THAT HITS US WHERE WE LIVE ...We may be able to do anything, but some things are more difficult than others. Take predicting when the Fed will next hike rates. Even Fed members can't forecast their own actions. San Francisco Fed President John Williams told Reuters: "There is definitely a data stream that could come through in the next couple of months that I would think would be supportive of two rate increases." But he added: "There's data we could get that wouldn't be supportive of that and it could be supportive of one maybe, or of none." By the way, the majority of economists are betting on "none." Then again, the Fed, like we, can do anything. What's not doing much is the economy, expanding only 1.2% in Q2. The National Association of Realtors chief economist said this "shows the economy barely above water...the third consecutive quarter of near 1% growth, as opposed to the historical long term average of 3%." He thinks housing has an answer: "More homes need to be built and that in turn will lead to faster economic growth." Hope also came from Freddie Mac's CEO who said 42% of non-refinance purchase loan buys they made in Q2 were to fund loans to first time homebuyers, the highest level in 10 years. But with no home to sell, first timers aren't helping supply. Can't do everything.
BUSINESS TIP OF THE WEEK... Take a moment to reflect on your goals--what you want to achieve this month, this year, and over longer time frames. Then create a plan that will keep you focused on your goals and get you there.
>> Review of Last Week HIGHER HIRES, HIGHER STOCKS... Friday's July Employment Report gave us all an upside surprise, coming in with 255,000 new Nonfarm Payrolls for the month, plus 18.000 more jobs thanks to upward revisions to May and June numbers. We also saw Hourly Earnings up 0.3% in July, and up 2.6% over a year ago. This was good stuff, but not so good that investors thought the very cautious Fed would be moved to hike rates in September. So the S&P 500 hit an all-time high, scoring its fifth weekly gain in the last six weeks. The tech-heavy Nasdaq also closed the week at an all-time high, its first record in more than a year, while the blue-chip Dow ended ahead as well.One analyst explained that while the July jobs numbers were good, they hadn't reached "escape velocity." By that, he meant a level that would show enough economic strength to let the Fed hike. He said 150,000 new jobs a month takes care of population growth, while economic growth is indicated above that figure. And wage growth needs to be 3% annually in order to push inflation up to where the Fed wants it. Other news of the day included the June Trade Deficit jumping 8.7%, to $44.5 billion, a 10-month high. Earlier in the week we saw both ISM Manufacturing and ISM Services indexes dipping in July, though still showing slow expansion. The week ended with the Dow UP 0.6%, to 18544; the S&P 500 UP 0.4%, to 2184; and the Nasdaq UP 1.1%, to 5221.As usual, the good jobs report was bad for bonds, sending Treasury prices down sharply. The 30YR FNMA 4.0% bond we watch finished the week down .03, at $107.14. In Freddie Mac's Primary Mortgage Market Survey for the week ending August 4, national average 30-year fixed mortgage rates fell back near their yearly lows after inching up for three weeks. This was put to "a disappointing advance estimate for second quarter GDP." Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?... A personal finance website reported investors flipped more than 110,000 homes last year, at an average profit of $55,000. It was the highest rate for flips since 2007.
>> This Week’s Forecast RETAIL SALES SLOW, WHOLESALE INFLATION STOPS... It's a light week for economic data, with the big report being Retail Sales, forecast up again in July though not by as much as June. The Producer Price Index (PPI), gauging wholesale price inflation, is expected to be at a standstill in July. But Core PPI, which excludes volatile food and energy prices, is predicted up, though less than it was in June. We watch wholesale price inflation because it's often a leading indicator of consumer price inflation. And that's what the Fed wants to see more of before it raises rates.>> The Week’s Economic Indicator Calendar Weaker 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 Aug 8 – Aug 12 DateTime (ET) ReleaseForConsensusPriorImpactTuAug 908:30Productivity - Prelim.Q20.5%-0.6%ModerateTuAug 908:30Unit Labor CostsQ21.7%4.5%ModerateWAug 1010:30Crude Inventories8/6NA1.413MModerateWAug 1014:00Federal Deficit JulNA-$149.2BModerateThAug 1108:30Initial Unemployment Claims8/6266K269KModerateThAug 1108:30Continuing Unemployment Claims7/30NA2.138MModerateFAug 1208:30Producer Price Index (PPI)Jul0.0%0.5%ModerateFAug 1208:30Core PPIJul0.2%0.4%ModerateFAug 1208:30Retail SalesJul0.4%0.6%HIGHFAug 1210:00Univ. of Michigan Consumer SentimentAug90.290.0ModerateFAug 1210:00Business InventoriesJun0.1%0.2%Moderate
>> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... Well, this week a few more Fed watchers think the central bank will hike the rate in November or December, but the majority still say it stays where it is through the end of the year. Note: In the lower chart, a 15% probability of change is an 85% certainty the rate will stay the same. Current Fed Funds Rate: 0.25%-0.5% After FOMC meeting on: Consensus Sep 210.25%-0.5%Nov 20.25%-0.5%Dec 140.25%-0.5%Probability of change from current policy: After FOMC meeting on: Consensus Sep 21 15% Nov 2 15% Dec 14 43%
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....