Category: Economic Update

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Economic update for the week ending September 15, 2018

New York Stock Exchange
Stock markets end the week near record highs – Stock markets surged this week to near record levels rebounding from a 1% drop the prior week. Investors feel that the longest bull market in history will last well into 2019 based on strong fundamentals in the economy. Those include: unemployment at a 40 year low, rising wages, the strongest consumer confidence level in 18 years, lower tax rates for corporations, a higher GDP, and less regulations. The only drag is the back and forth on trade and tariffs, which investors feel are mostly threats for negotiations and higher interest rates. With the last core inflation rate at just 2.2%, investors feel that rates won’t get much higher. They do expect another increase by the Fed at the end of this month and are waiting to see if higher wages in August causes upcoming inflation rates to rise. The Dow Jones Industrial Average closed the week at 26,151.67, up from 25,916.53 last week. It is up 5.8% year-to-date.  The S&P 500 closed the week at 2,904.98, up from 2,861.78 last week. It’s up 8.7% year-to-date. The NASDAQ closed the week at 8,010.04, up from 7,992.54 last week. It’s up 16% year-to-date.

 

Treasury Bond Yields  higher –  The 10-year treasury bond closed the week yielding 2.99%, up from 2.94% last week. The 30-year treasury bond yield ended the week at 3.13%, up  slightly from 3.11% last week. We watch treasury bond yields because mortgage rates follow bond yields.

 

Mortgage rates higher this week – The September 13, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.60%, up from 4.54%  last week. The 15-year fixed was 4.06%,  up  from 3.99%  last week. The 5-year ARM was 3.93%, unchanged from 3.93% last week.

 

We should begin to see August housing sales numbers around the end of next week.

 

Have a great weekend!
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Economic update for the week ending September 8, 2018

Wages grew at highest pace since 2009 – 201,000 new jobs created in August – The Labor Department reported that the U.S. economy added 201,000 new jobs in August. That number beat analysts expectations and marked the 95th conservative month of job growth. The unemployment rate held steady at 3.9%, a 50 year low. The highlight of the report was that wages grew 2.9% in August from one year ago. That was the highest wage growth since 2009. Wages have been rising at just 2.6% – 2.7% for many years. Usually when unemployment is at historic low rates, more competition for workers drives wages up. Until August, that has not happened. Experts have been baffled at how stubborn wage growth has been with such robust job gains. In January, it appeared that wages were finally moving higher, but wages dropped back to rising just 2.6% – 2.7% year-over-year in the following months until August. In the coming months we will see if this is a trend to higher wages or just a unique one month reading like we saw in January.

Stocks drop this week – Renewed trade and tariff talk weighed on stocks this week. A robust job and wage growth report did not cause a rally. With consumer spending accounting for nearly 70% of the economy one would think that higher wages and consumer confidence at a 18 year high would be encouraging. On the other hand if consumer spending picks up that could cause inflation, which is very low to pick up. Higher inflation would lead to higher interest rates and increase borrowing costs. The Dow Jones Industrial Average closed the week at 25,916.53, down from 25,964.82 last week. It is up 4.8% year-to-date. The S&P 500 closed the week at 2,861.78, down from 2,901.52 last week.  It’s up 7.4% year-to-date. The NASDAQ closed the week at 7,992.54, down from 8,109.64 last week. It’s up 14.5% year-to-date.

Treasury Bond Yields  higher – The 10-year treasury bond closed the week yielding 2.94%, up from 2.86% last week. The 30-year treasury bond yield ended the week at 3.11%, up from 3.02% last week. We watch treasury bond yields because mortgage rates follow bond yields.

Mortgage rates almost unchanged in September 6 survey, but rates rose after jobs report. Next week’s rates will be higher. The September 6, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.54%, almost unchanged from 4.52% last week. The 15-year fixed was 3.99%, up  from 3.97% last week. The 5-year ARM was 3.93%, up from 3.85% last week.

Have a great weekend!
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Economic update for the week ending September 1, 2018

Stocks hit record highs this week – Stocks rallied at the beginning of the week after a televised phone call with President Trump and Mexican President Enrique Peña Nieto, where they announced that they are close to a trade deal to replace NAFTA. There was optimism that a deal was in the works with Canada, which seemed to stall by week’s end. While trade issues have been a drag on stocks, they have risen to historic highs because of extremely strong economic conditions. In the past two quarters, corporate profits have averaged 20% above the same quarters last year (about 14% of that is tax savings, as the corporate tax rate has been reduced to 21% from 35% last year). The Consumer Confidence Index hit its highest level since 2000 this week. The unemployment rate is at a 20 year low. The second quarter GDP was revised up to 4.2% this week. Interest rates are still at historically low levels, and tame inflation has reduced the risk of rates rising as high or as quickly as investors feared at the beginning of the year when inflation appeared to be picking up. The only drags are fears of a trade war and wage growth, which has been stubbornly stagnant, which is unexpected with such low unemployment. The Dow Jones Industrial Average closed the week at 25,964.82, up from 25,790.35 last week. It is up 5% year-to-date. The S&P 500 closed the week at 2,901.52, up from 2,884.69 last week. It’s up 8.5% year-to-date. The NASDAQ closed the week at 8,109.54, up from 7,945.98 last week. It’s up 17.5% year-to-date.

Treasury Bond Yields slightly higher – The 10-year treasury bond closed the week yielding 2.86%, up from 2.82% last week. The 30-year treasury bond yield ended the week at 3.02%, up from 2.97% last week.

Mortgage rates almost unchanged this week – The August 30, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.52%, almost unchanged from 4.51% last week. The 15-year fixed was 3.97%, down from 3.98% last week. The 5-year ARM was 3.85%, up slightly from 3.82% last week.

Have a great Labor Day weekend!
Syd

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Economic update for the week ending August 25, 2018

Stocks end week at record highs – Longest Bull Market in history – Stocks ended the week at record highs, for the first time since January, after Fed Chairman Powell released remarks stating that inflation is tame and The Fed no longer fears the economy will overheat and spike inflation. These remarks led investigators to assume he was signing that The Fed was nearing the end of interest rate hikes.  The market also surpassed the bull market of the 1990s as the longest bull market ever hitting 3,450 days this week. The Dow Jones Industrial Average closed the week at 25,790.35, up from 25,669.33 last week. It is up 4.3% year-to-date. The S&P 500 closed the week at 2,874.69, up from 2,850.13 last week.  It’s up 7.1% year-to-date. The NASDAQ closed the week at 7,945.98, up from 7,816.33 last week. It’s up 15.1% year-to-date.

Treasury Bond Yields drop  –  The 10-year Treasury bond closed the week yielding 2.82%, down from 2.87% last week. The 30-year Treasury bond yield ended the week at 2.97%, down from 3.03% last week.

Mortgage rates slightly lower again this week – The August 23, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.51%, down from 4.53%  last week. The 15-year fixed was 3.98%, down from 4.01% last week. The 5-year ARM was 3.82%, down slightly from 3.86% last week.

New home sales dip in July – The Commerce Department reported that sales of new homes dropped to the weakest pace in nine months in July. New home sales fell 1.7% in July from June’s levels to an annualized rate of 627,000 sales. Analysts expected the number to be closer to a rate of 645,000 sales. Prices increased just 1.8% from last July’s levels. Inventory of new homes for sale also increased to a 5.9 month supply in July. That was up from 5.7 months in June.

July U.S. Total existing-home sales – The National Association of Realtors reported that the number of sales of previously-owned homes fell for a fourth straight month in July. Existing-home sales, which include single-family homes, town-homes, condominiums, and co-ops fell 0.7% in July from June. Year-over-year sales were 1.5% below last July’s sales pace. That marked the fifth straight month of year-over-year declines in sales and the slowest pace since 2016. It should be noted that the number of existing- home sales in 2017 was a record number. Home prices continued to increase. The median price paid for an existing-home in July was 4.5% higher than last July. That marked the 77th straight month of year-over-year price increases. Nationally, housing inventory decreased 0.5% in July. The unsold inventory index stood at a 4.3 month supply, unchanged from last July’s level.

California existing home sales slow for third straight month in July – Prices higher – The California Association of Realtors reported that existing single family home sales totaled 406,920 in July on a seasonally adjusted annualized basis. That was down 0.9% from June and 3.4% below last July’s level when home sales totaled 421,460 on an annualized basis. The state-wide median price paid for a home was $591,460 in July, up 7.6% from last July. On a regional level, prices in Los Angeles County rose 5.5%, Orange County prices rose 5.6%, and Ventura County prices rose just 2.1% from July 2017.  Inventory levels continued to increase. The unsold inventory index ticked up to a 3.3 month supply in July, up from 3.2% last July. A normal market has a 6 -7 month supply. Active listings increased for a fourth consecutive month after 33 months of declines, increasing 11.9% from last July. 

Have a great weekend!
Syd

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Economic update for the week ending August 18, 2018

California employers add 46,700 jobs in July – The Employment Development Department reported that 46,700 new jobs were added in July. The unemployment rate held at a record low of 4.2%. The number of job gains exceeded expectations, but average hourly wages rose just 2.2% from one year ago.

Stocks surge on renewed trade talks – Stocks had a turbulent week. They dropped early in the week as fears that a currency and economic collapse in Turkey could spread to other countries within the region, but surged Thursday and Friday as trade negotiations with China, Mexico, and Canada were reported. Investors are also very optimistic as the second quarter earnings season comes to a close. Most companies reported double digit percent increases in profits. The Dow Jones Industrial Average closed the week at 25,669.33, up from 25,313.14 last week. It is up 3.8% year-to-date. The S&P 500 closed the week at 2,850.13, up from 2,833.25 last week. It’s up 6.6% year-to-date. The NASDAQ closed the week at 7,816.33, down from 7,839.12 last week. It’s up 13.2% year-to-date.

Treasury Bond Yields unchanged  – The 10-year Treasury bond closed the week yielding 2.87%, unchanged from 2.87% last week. The 30-year treasury bond yield ended the week at 3.03%, unchanged from 3.03% last week.

Mortgage rates slightly lower for the week – The August 16, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.53%, down from 4.59% last week. The 15-year fixed was 4.01% from 4.05% last week. The 5-year ARM was 3.86%, down slightly from 3.90% last week.

California existing home sales slow for third straight month in July – The California Association of Realtors reported that existing single-family home sales totaled 406,920 in July on a seasonally adjusted annualized basis. That was down 0.9% from June and 3.4% below last July’s level when home sales totaled 421,460 on an annualized basis. The state-wide median price paid for a home was $591,460 in July, up 7.6% from last July. On a regional level, prices in Los Angeles County rose 5.5%, Orange County prices rose 5.6%, and Ventura County prices rose just 2.1% from July 2017. Inventory levels continued to increase. The unsold inventory index ticked up to a 3.3 month supply in July, up from 3.2% last July. A normal market has a 6 -7 month supply. Active listings increased for a fourth consecutive month after 33 months of declines, increasing 11.9% from last July. 

Have a great weekend!

Syd

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Economic update for the week ending August 11, 2018

Stocks lower for the week – Stock market indexes posted their first weekly loss since the last week of June. Markets, which were within 1/2% of all time highs last week after a stellar second quarter earnings season, reacted to a financial crisis in Turkey and an increase in back and forth tariff threats between The U.S. and China. The Dow Jones Industrial Average closed the week at 25,313.14, down from 25,462.08 last week. It is up 2.4% year-to-date. The S&P 500 closed the week at 2,833.28, down from 2,840.30 last week. It’s up 6.0% year-to-date. The NASDAQ closed the week at 7,839.12, up from 7,812.01 last week. It’s up 13.6% year-to-date.

Treasury Bond Yields lower this week – The 10-year treasury bond closed the week yielding 2.87%, down from 2.96% last week. The 30-year treasury bond yield ended the week at 3.03%, down from 3.09% last week. Mortgage rates follow bond yields. I’d expect next weeks mortgage rates to be slightly lower.

Mortgage rates almost unchanged for the week – The August 9, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.59%, almost unchanged from 4.60% last week. The 15-year fixed was 4.05%, almost unchanged from 4.08% last week. The 5-year ARM was 3.90%, down slightly from 3.93% last week.

Housing affordability drops to a 10-year low in the second quarter – The California Association of Realtors reported that only 26% of California households could afford to purchase a median priced home in California. That was down sharply from 31% in the first quarter of 2018. It was also down from 29% in the second quarter of 2017. Rising home prices, higher interest rates, and stagnant incomes have driven affordability down. For example, home prices in June rose over 8%, while wages grew just 2.7% from one year earlier. Interest rates were no higher in the second quarter of 2018 than in the first quarter, but were higher than in the second quarter of 2017.

Have a great weekend!

Syd

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Economic update for the week ending August 4, 2018

157,000 new jobs added in July – The Bureau of Labor Statistics reported that 157,000 new jobs were added in July. This was below the 193,000 expected by analysts, but still a healthy number. In the last 12 months, job gains have averaged 203,000 a month. Wage growth, which is an indicator of inflation risk, showed average hourly wages growing by 2.7% over the past 12 months. The unemployment rate dropped to near historic lows of 3.9%, down from 4% in June. While more wage growth would be nice, 2.7% won’t put much pressure on The Fed to raise rates to combat inflation risks. Usually, with unemployment so low you would see wage growth at 3% or more. Wages have been stubborn to rise, which has kept inflation in check and interest rates historically low–especially with such robust growth.

Strong corporate earnings overshadowed trade fears this week – With over 30% of companies reporting second quarter earnings, this earnings season is turning out mostly positive. Most companies posted results that beat expectations. While Tech stocks sunk last week after Facebook reported disappointing earnings, they soared this week after Apple’s earnings were reported. Apple became the first company to have a valuation of over $1 trillion. China and the U.S. both stepped up tariffs on more products, while The U.S. and The European Union edged toward a trade deal. Trade fears probably are the reason stocks did not rally much higher on such strong earnings. The Dow Jones Industrial Average closed the week at 25,462.08, up slightly from 25,451.06 last week. It is up 3% year-to-date.  The S&P 500 closed the week at 2,840.30, up from 2,818.82 last week. It’s up 6.2% year-to-date. The NASDAQ closed the week at 7,812.01, up from 7,737.43 last week.  It’s up 13.2% year-to-date.

Treasury Bond Yields unchanged this week  –  The 10-year Treasury bond closed the week yielding 2.95%, almost unchanged from 2.96% last week. The 30-year Treasury bond yield ended the week at 3.09%, unchanged from 3.09% last week. We watch bond rates because mortgage rates follow bond rates.

Mortgage rates  slightly higher for the week – The August 2, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.60%, up slightly from 4.54% last week. The 15-year fixed was 4.08%, up slightly from 4.02% last week. The 5-year ARM was 3.93%, up slightly from 3.87%  last week.

Have a great weekend!
Syd
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Economic update for the week ending July 28, 2018

Strong second-quarter earnings lifts Dow and S&P, while NASDAQ drops on tech fears –  As second-quarter earnings season has begun, most companies are reporting better-than-expected earnings. Social media companies were an exception. The NASDAQ hit an all-time high on Wednesday, only to fall sharply after Facebook reported earnings below expectations. Facebook stocks dropped 20% on Thursday. Friday, Twitter reported a loss in users with disappointing earnings and a more cautious outlook on growth. Twitter stocks dropped over 20%. These dragged the tech-heavy NASDAQ down and it closed lower for the week. The Dow Jones Industrial Average closed the week at 25,451.06, up from 25,058.12 last week. It is up 3% year-to-date.  The S&P 500 closed the week at 2,818.82, up from 2,801.31 last week.  It’s up 5.4% year-to-date. The NASDAQ closed the week at 7,737.42, down from 7,820.20 last week. It’s up 12.1% year-to-date.

Treasury Bond Yields higher this week – The 10-year Treasury bond closed the week yielding 2.96%, up  from 2.89% last week. The 30-year Treasury bond yield ended the week at 3.09%, up  from 3.03% last week. We watch bond rates because mortgage rates follow bond rates.

Mortgage rates unchanged for the week – The July 26, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.54%, almost unchanged from 4.52% last week. The 15-year fixed was 4.02%, almost unchanged from 4.00% last week. The 5-year ARM was 3.87%, unchanged from 3.87%  last week. Rates rose at the end of the week. Expect next week’s rates to be slightly higher.

U.S. Gross Domestic grew 4.1% in the second quarter – Highest quarterly reading in four years –  The Commerce Department reported that the Gross Domestic Product rose 4.1% in the second quarter of 2018. That reading was in line with what analysts expected. It was the highest quarterly growth since the third quarter of 2014 when GDP grew 4.9%, and marked a nice rebound from the first three months of this year when the economy grew at a slight 2.2%. Consumer spending grew at an annual rate of 4% in the second quarter, up from a sharp pullback in the first quarter. Business investment grew 5.4%, down from 8% in the first quarter. Exports surged 9.3% in the quarter, as the trade gap narrowed. Experts point to a surge in soybeans and other items that were purchased prior to tariffs going into effect. They warn that there is no way demand for these items increased so sharply, and they were purchased to be held in inventory for later consumption. They feel this will adversely effect next quarter’s results, as advance purchases were made this quarter instead of next quarter. They still feel it was a positive quarter and the economy is very strong. Inflation also moderated as The Commerce Department’s Personal Expenditure  Consumption Price Index grew at an annual rate of just 1.8% in the second quarter, down from 2.2% in the first quarter.

Fewer California existing homes sold in June – Prices continue to increase – The California Association of Realtors reported that existing home sales totaled 410,800 in June on a seasonally adjusted annualized rate. While that was .4% higher than the number of existing home sales in May, it was down 7.3%, year-over-year from June 2017, when the annualized rate was 443.120. That was the largest year over decline in sales in almost four years. The statewide median price was $602,750 in June, up 8.5% from last June’s median price. The median price paid for a condominium or townhome was 7% higher than last June. Statewide Inventory levels rose for the third consecutive month, up 8.1% in June. That was the largest monthly increase since January 2015, when listings increased 11%. The unsold inventory index had a 3 month supply of homes for sale, up from 2.7 months in June 2017. A normal market has a 6 month supply.

New home sales soften in June – The Commerce Department reported that sales of new single-family homes dropped 5.3% in June on a month-over-month basis. New home sales in June totaled 631,000 on a seasonally adjusted annualized rate. That was the lowest rate of new home sales since October 2017.

Have a great weekend!
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Economic update for the week ending July 21, 2018

Stocks end week with mixed results – Strong second quarter earnings were hampered by trade and tariff fears.  Stock market indexes were slightly changed from last week. The Dow Jones Industrial Average closed the week at 25,058.12, up from 25,019.42 last week. It is up 1.4% year-to-date.  The S&P 500 closed the week at 2,801.31, unchanged from 2,801.83 last week. It’s up 4.8% year-to-date. The NASDAQ closed the week at 7,820.20,  down slightly form 7,825.82 last week. It’s up 13.3% year-to-date.

 

Treasury Bond Yields higher this week  –  The 10-year Treasury bond closed the week yielding 2.89%, up  from 2.83% last week. The 30-year Treasury bond yield ended the week at 3.03%, up from 2.93% last week. We watch bond rates because mortgage rates follow bond rates.

 

Mortgage rates almost unchanged – The July 19, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.52%,  unchanged from 4.53% last week. The 15-year fixed was 4.00%, almost unchanged from 4.02% last week. The 5-year ARM was 3.87%, unchanged from 3.86% last week.

 

California Unemployment rate remains at all time low in June -The Employment Development Department reported that just 800 new jobs were created in June. The unemployment rate held steady at 4.2%. Average hourly wages were $30.42 in June. That was just 2.6% above last June’s rate. Los Angeles County had much better results, 8,800 new jobs were created in June.  Average hourly wages grew 4.8% in Los Angeles and Orange County. 

 

The California Association of Realtors has not released June sales figures. I’d expect them any day. Housing sale prices and numbers will be included in next week’s update. I would not be surprised to see inventory levels begin to creep up from historic low levels based on what we are seeing. We are seeing a number of homes that are being reduced in order to sell.

 

Have a great weekend!
Syd
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Economic update for the week ending July 14, 2018

Stocks up for a second straight week – Stocks rallied again this week as investors expect a robust second quarter profit reporting season. Fueled by tax cuts and a strong global economy, many companies are expected to report double-digit profit growth. Stock markets are now just 3% below their all-time highs reached in January. The only thing holding them back is fears of trade wars and tariffs, according to analysts. The Dow Jones Industrial Average closed the week at 25,019.41, up from 24,456.58 last week. It is up 1.2% year-to-date.  The S&P 500 closed the week at 2,801.31, up from 2,759.83.  It’s up 4.8% year-to-date. The NASDAQ closed the week at 7,825.98, up from 7,688.39 last week.  It’s up 13.8% year-to-date.

 

Treasury bond yields mixed this week  –  The 10-year and the 30-year treasury yield ended the week just 0.10% apart. It’s unusual for the 10-year and the 30-year yield to be so close. Usually an investor would want a higher rate when investing for a longer period of time. This tells us that investors may feel that rates will come down in the coming years. The 10-year Treasury bond closed the week yielding 2.83%, up  from 2.78% last week. The 30-year Treasury bond yield ended the week at 2.93%, almost unchanged from 2.94%  last week. We watch bond rates because mortgage rates follow bond rates.

 

30-year mortgage rates unchanged, while shorter term rates were slightly higher this week –  The July 12, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.53%, unchanged from 4.52% last week. The 15-year fixed was 4.02%, up slightly from 3.99% last week. The 5-year ARM was 3.86%, up from 3.74% last week.

 

We will have June sales figures next week. The number of sales have been lower this year than in 2017–this is due to tighter inventory. The reduced number of homes for sale has also pushed price increases up at a faster pace than over the last few years. Year-over-year price increases have been almost 9% for a median priced home in California. In May, there was just a 3-month supply of homes for sale–a normal market would be six to seven months. We may be beginning to see some pressure in the higher price ranges in all of our areas. This may be because sellers have been too aggressive in pricing. Unfortunately, when one or two sellers push the price above what is realistic, others look at what’s listed instead of what is selling. We are seeing homes in many areas beginning to reduce.  Let’s see if this impacts the inventory levels when the reports come out.

 

Have a great weekend,
Syd
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