Category: Economic Update

Stocks higher this week – Stocks soared on Monday after an announcement that The U.S. and China would hold off on imposing any new tariffs. It was first reported that China had agreed to encourage purchases of U.S. goods in order to reduce the trade imbalance between the two countries. Throughout the week it became apparent that there was no actual deal in place and stocks gave up much of their gains from the beginning of the week. Interest rates dropped after minutes were released from the May Federal Reserve meeting in which they made statements reiterating that interest rate rises will remain gradual. This year a new Fed Chairman was appointed and almost half of the voting members have been replaced. Investors speculated that the new makeup of the Fed leaned towards more aggressive increases. The minutes from the May meeting calmed investors, and bond and mortgage rates dropped. The Dow Jones Industrial Average closed the week at 24,753.08, up from last week’s close of 24,715.09. It is up 0.1% year-to-date. The S&P 500 closed the week at 2,721.23, up from 2,712.97 last week. It’s up 1.8% year-to-date. The NASDAQ closed at 7,433.85, up from 7,354.34 last week. It is up 7.7% year-to-date.

Treasury Bond yields drop this week – The 10-year treasury bond closed the week yielding 2.93%, down from 3.06% last week. The 30-year treasury bond yield ended the week at 3.09%, down from 3.20% last week.

Mortgage Rates higher this week – The May 24, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.66%, up from last week’s 4.61%. The 15-year fixed was 4.15%, up from 4.08% last week. The 5-year ARM was 3.87%, up from 3.82% last week. Rates dropped Thursday and Friday, so next week’s rates will be lower. 

U.S. existing home sales pace slows and prices increase in April – The National Association of Realtors announced that the number of sales of existing homes nationwide dropped 1.6% on a year-over-year basis in April. It should be noted that U.S. existing home sales were at record levels in 2017, so even with a slight drop, although not optimal, sales numbers are still at a robust level. Prices continued to increase. The median price paid for a home nationally was up 5.3% from last April, the 74th straight month of year-over-year increases. The number of existing homes for sale were 6.3% lower than last April. The unsold inventory index nationwide had a 4 month supply of housing available for sale, down from a 4.2 month supply last April. That was the 42nd straight month of year-over-year inventory level declines. The western region of the U.S. showed even better results. Sales for the western region were down just 0.8% year-over-year and the median price was 6.8% higher than last April.

California added 39,300 jobs in April and unemployment dropped to a record low – The Employment Development Department reported that 39,300 new jobs were created in April. The statewide unemployment rate dropped to 4.2%. 

Housing Affordability index rises in first quarter of 2018 – The California Association of Realtors reported that 31% of home buyers could afford to purchase a median-priced existing single-family home in California in first-quarter of 2018. That was up from 29% in the fourth quarter of 2017. Year-over-year affordability was down slightly. The index stood at 32% in the first quarter of 2017.

Have a great holiday weekend!

Syd

California existing home sales and prices increase in April – The California Association of Realtors reported that total existing home sales totaled 416,790 in April, on a seasonally adjusted annualized rate, that was 2.2% higher than last April’s sales rate. Prices continue to increase. Statewide, the median price paid for a home was $584,460, up 8.6% from April 2017. Local markets posted varying gains. In Los Angeles County, the median price paid for a home was up 10.1% from last April. The median price in Ventura County increased just 4.7% year-over-year. The Orange County median price gained 5.5%. Inventory levels rose 1.9% in April, marking the first rise in three years. The unsold inventory index in April had a 3.2 month supply of homes, up from a 2.9 month supply in March, but still lower than a 3.3 month supply in April 2017.

Stocks lower for the week – Higher interest rates and renewed trade talks put pressure on stocks this week. Oil prices reached a three year high, which some believe will spark inflation levels and cause the Federal Reserve to raise rates more swiftly. At the same time, the dollar straightening to a 5 month high. That makes imports less expensive and lowers inflationary pressure. We will have to wait and see. Experts are mixed on whether bond rates have topped out for the year. The 10-year treasury bond yield topped 3% this week, and hit 3.11% at one point before dropping back. Higher interest rates increase corporate borrowing costs, which lowers profits. The Dow Jones Industrial Average closed the week at 24,715.09, down from last week’s close of 24,831.17. It is unchanged year-to-date. The S&P 500 closed the week at 2,712.97, down from 2,727.72 last week. It’s up 1.5% year-to-date. The NASDAQ closed at 7,354.34, down from 7,402.88 last week. It is up 6.5% year-to-date.

Treasury Bond yields much higher this week – The 10-year treasury bond closed the week yielding 3.06%, up sharply from 2.94% last week.The 30-year treasury bond yield ended the week at 3.20%, up from 3.10% last week.

Mortgage Rates higher this week – The May 17, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.61%, up from last week’s 4.55%. The 15-year fixed was 4.08%, up from 4.01% last week. The 5-year ARM was 3.82% up from 3.77% last week.

Have a great weekend!

Syd

Stocks up over 2% this week – Stock markets gained more than 2% this week. Strong first quarter earnings and a reduced fear of new tariffs sparked a rally this week. Corporate earnings reported for Q1 2018 have been the strongest since the third quarter of 2010. A cessation of talk of imposing tariffs on imported goods and materials has investors feeling that the Trump administration has backed off on those. Fears of a trade war with China caused a sharp sell off in February and March. Oil prices hit a 3 1/2 year high this week. Rising oil prices have helped energy stocks, but have increased prices at the pump. The Dow Jones Industrial Average closed the week at 24,831.17, up from last week’s close of 24,262.52. It is up 0.5% year-to-date. The S&P 500 closed the week at 2,727.72, up from 2,663.42 last week. It’s up 2% year-to-date. The NASDAQ closed at 7,402.88, up from 7,209.62% last week. It is up 7.2% year-to-date.

Treasury Bond yields slightly lower this week – The 10-year treasury bond closed the week yielding 2.94%, almost unchanged from 2.95% last week.The 30-year treasury bond yield ended the week at 3.10%, slightly down from 3.12% last week.

Mortgage Rates unchanged this week – The May 10, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.55%, unchanged from last week’s 4.55%. The 15-year fixed was 4.01%, almost unchanged from 4.03% last week. The 5-year ARM was 3.77%, up from 3.69% last week. Rates were slightly lower on Friday, so next week’s rates could be slightly lower. 

Have a great weekend and happy Mother’s Day!

Syd

April unemployment rate lowest since 2000 – The Department of Labor Statistics reported that U.S. employers added 164,000 new jobs in April. That was a little below the 190,000 that analysts expected. The unemployment rate dropped to 3.9%, an 18-year low. The unemployment rate has steady declined from its peak of 10% in 2009. Average hourly wages grew just 2.6% from April 2017. This was the most anticipated part of the report. Wage growth has been stagnant, which is unexpected. Usually when the unemployment rate drops there is more competition for workers and wages rise. That has not happened at the rate expected over the last 9 years. In January, wages finally began showing signs of rising when year-over-year wage growth came in at 2.9%, which surpassed analysts. Interest rates began to rise because experts felt that higher wages would give people more spending power and lead to higher inflation. Higher inflation causes interest rates to rise. Stocks slipped because higher wages raise corporate labor costs, and higher interest rates raise their borrowing costs, which lowers profits. It is beginning to appear that January’s wage gain of 2.9% may have been an atypical result, as February and March numbers showed that wages grew 2.7% and April is now back to a 2.6% year-over-year wage gain.

Stocks end week mixed in another turbulent week of trading – Despite a rally on Friday, where the DOW gained 332 points, stocks finished the week mixed. Companies reported strong third quarter earnings, but gave more cautious guidance on future profit increases. Companies expressed more caution because of increased costs of steel and aluminum due to tariffs, increased energy costs (oil prices have increased dramatically), higher interest rates and borrowing costs, and higher wages and labor costs. Friday’s jobs report revealed that wage increases are back to the levels we saw in 2016 and 2017, and not the wage increase levels we had seen at the beginning of 2018, which investors feel will lower pressure on interest rates increases. Stocks rose sharply on Friday after the jobs report was released. The Dow Jones Industrial Average closed the week at 24,262.51, down from last week’s close of 24,311.19. It is down 1.8% year-to-date. The S&P 500 closed the week at 2,663.42, almost unchanged from 2,669.91 last week. It’s down 0.4% year-to-date. The NASDAQ closed at 7,209.62, up from 7,119.80 last week. It is up 4.4% year-to-date.

Treasury Bond yields higher 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 3.12%, slightly down from 3.14% last week.

Mortgage Rates slightly lower this week – The May 3, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.55%, down slightly from last week’s 4.58%. The 15-year fixed was 4.03%, almost unchanged from 4.02% last week. The 5-year ARM was 3.69%, down from 3.74% last week. Rates were slightly lower on Friday, so next week’s rates could be slightly lower. 

California’s GDP figures makes it the worlds fifth largest economy – Data released by the Commerce Department showed that California’s GDP exceeded $2.7 trillion in 2017. Only the United States, China, Japan, and Germany surpassed the economic output of California.

Have a great weekend!

Syd