MONDAY, October 22nd
A new week and a new attitude, as markets are now nearly fully pricing in another Fed rate cut in October. The assigned probability of about 96% is up from 33% early last week that the target fed funds rate will drop by 25 basis points to 4.50%. The fed funds contract for December is trading at a price that assumes the Fed will reduce interest rates below 4.50% by year's end.
TUESDAY, October 23rd
Strong earnings today gave traders cause for exuberance. As predicted, Apple shares easily topped estimates to climb 67%, while telephone giant AT&T increased third-quarter profit by 41 percent, borne upward by record wireless revenue and acquisition savings. On the home front, reports that mortgage lending biggie Countrywide Financial Corp. may change terms on $16 billion of adjustable-rate mortgages before the end of 2008 gave hope to borrowers facing possible foreclosure. The Dow rose 109.26 to finish at 13676.23, while the NASDAQ reached 2799.26 for a gain of 45.33.
WEDNESDAY, October 24th
The MBA mortgage applications index was unchanged for week ending October 19. A decrease of 3.1% in purchase applications was offset by a 4.0% gain in refinance applications. All eyes are upon the Fed as it prepares to meet the last of October, fueling expectations that another rate cut could change the subprime picture.
The NAR reported that existing home sales fell 8.0% last month to an annualized pace of 5.04 million units. Home sales are counted when the transaction closes so these data reflect sales initiated in August, amidst the peak of the mortgage market turmoil. September's decline, the largest so far in the current housing correction, drops the sales pace to the lowest in nearly 10 years. While further declines are expected in housing activity this year and next, on the upside, existing home sales are currently the fifth highest on record and mortgage rates remain low and stable. NAR senior economist points out problems in the mortgage market have eased in recent weeks. Conforming loans are abundantly available, pricing has improved on jumbo loans and FHA loans will help to replace subprime mortgages.
THURSDAY, October 25th
New home sales gained 4.8% in September to a seasonally adjusted annual rate of 770,000. August new home sales were revised sharply lower to an annual rate of 735,000 from the original estimate of 795,000. Despite September's rebound, sales remain very weak, down 23.3% from their year ago level.
New orders for durable goods tumbled 1.7% in September, well below an expected gain of 1.5%. A 38.7% plunge in defense orders led the weakness last month though other categories declined as well. Details in the report suggest that business investment in capital goods continues to expand but at a slower pace. Manufacturing momentum has slowed heading into the fourth quarter mainly affected by weakness in transportation orders.
Initial claims for unemployment insurance fell 8k to 331k for the week that ended October 20. Despite the drop, the level of jobless claims remains elevated suggesting a weaker pace of hiring related to widespread layoffs in the home building and mortgage lending industries.
Mortgage rates fell as the weaker than expected economic data this week pointed to slower economic growth ahead. 30 year fixed rate mortgages averaged 6.33% this week compared to 6.40% last week according to Freddie Mac's mortgage market survey.
FRIDAY, October 26th
Consumer sentiment dropped further in its final reading for October, falling to 80.9% from 83.4% in September and 82.0% mid-month. A lower expectations index score related to weaker housing, slower job growth and high oil prices led the overall decline in consumer attitudes.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 13806.70 13522.02 +284.68 or +2.11%
NASDAQ 2804.19 2725.16 +79.03 or +2.90%
WEEK IN ADVANCE
The two-day FOMC meeting with the statement due out Wednesday afternoon will dominate market action and thus the direction of interest rates in the coming week. The Fed is widely expected to cut rates by 25 basis points which should help stabilize but not entirely alleviate weakness in current housing market conditions. Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Tuesday, October 30, 2007
Saturday, October 20, 2007
Economic Highlights for the Week Ending October 19, 2007
MONDAY, October 15th
Rate cut expectations have shifted due to a recent raft of strong indicators. Current implications are that the Fed will remain on hold at the October 30-31 meeting. Fed funds futures traders are pricing in a 70% probability the fed funds target will remain unchanged, up from a 40% chance in early October and 10% odds in early September. However, markets are expecting one more rate cut by the end of 2007.
The Creditforecast.com Quarterly Household Credit Report showed further deterioration in credit quality as borrowing moderated in Q3. Evidence that only a portion of consumers are affected by credit problems is the fact that the Equifax risk score national average fell 0.9 points in Q3 to 698.6, virtually unchanged from last year.
TUESDAY, October 16th
Industrial Production rose 0.1% in September, while the 0.2% increase in August was scaled back to unchanged. The data indicate that manufacturing and business equipment production rose at a healthy pace in the third quarter with moderate momentum heading into Q4.
The NAHB October Housing Index, a measure of homebuilder optimism, was down 2 points to 18, a cumulative drop of 18 points since March and the lowest rating since the index was inaugurated. The index is down in every component and at its regional lowest in the western United States. Builders, faced with tightening credit, a surfeit of inventory and anemic sales, will put off starts in the coming months. Residential investment is expected to subtract from GDP growth through the first half of 2008.
WEDNESDAY, October 17th
The Consumer Price Index rose 0.3% in September, higher than an expected gain of 0.2%. Consumer inflation is up 2.8% over the past year. Excluding the often volatile food and energy categories from the index, core consumer prices gained 0.2% on the month, in line with expectations and 2.1% on the year. With inflation in check, future Fed policy actions will lean more toward how economic growth is impacted by the housing market and credit conditions.
New residential construction put in place in September plummeted 10.2% to an annualized pace of 1.19 million. Lower than expected Housing Starts were led by a 34% decrease in the multifamily sector. Single family starts fell 1.7%.
The MBA Mortgage Applications Index rose 0.7% to 656.3% for the week that ended October 12. Total applications are 12.0% above their year ago level. The purchase index gained 2.1% on the week while refinancing applications dropped 1.1%. Application activity will likely remain range bound until the Fed meets at the end of the month.
The Fed's round up of activity in the twelve Federal Reserve Banking Districts known as the beige book showed the economy continued to expand in September and early October, but that the pace of growth moderated in many areas. The anecdotal evidence in this survey proffered little to clarify future monetary policy. Economists and financial markets remain spilt about the Fed’s next rate move.
THURSDAY, October 18th
Mortgage rates were flat to slightly higher this week as the financial markets tried to decipher the Fed's next move amid a mixed bag of economic indicators. 30-year fixed rate mortgages averaged 6.40% this week the same as last week according to Freddie Mac's mortgage market survey.
Jobless Claims jumped 28k to 337k for the week that ended October 13. The surge in initial claims indicates softer labor market conditions with an increased pace of layoffs. Hiring has also been weak. October payrolls are likely to come in under 100k when reported on the first Friday in November.
FRIDAY, October 19th
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 13522.02 14081.05 -559.03 or -3.97%
NASDAQ 2725.16 2800.12 -74.96 or -2.67%
WEEK IN ADVANCE
Housing indicators dominate the economic calendar in the coming week with exiting home sales on Wednesday and new home sales due out Thursday. The Fed believes the housing sector and subsequent credit woes remain some of the central risks to the economy. Further weakness in home sales would tip the scales in favor of another rate cut.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Rate cut expectations have shifted due to a recent raft of strong indicators. Current implications are that the Fed will remain on hold at the October 30-31 meeting. Fed funds futures traders are pricing in a 70% probability the fed funds target will remain unchanged, up from a 40% chance in early October and 10% odds in early September. However, markets are expecting one more rate cut by the end of 2007.
The Creditforecast.com Quarterly Household Credit Report showed further deterioration in credit quality as borrowing moderated in Q3. Evidence that only a portion of consumers are affected by credit problems is the fact that the Equifax risk score national average fell 0.9 points in Q3 to 698.6, virtually unchanged from last year.
TUESDAY, October 16th
Industrial Production rose 0.1% in September, while the 0.2% increase in August was scaled back to unchanged. The data indicate that manufacturing and business equipment production rose at a healthy pace in the third quarter with moderate momentum heading into Q4.
The NAHB October Housing Index, a measure of homebuilder optimism, was down 2 points to 18, a cumulative drop of 18 points since March and the lowest rating since the index was inaugurated. The index is down in every component and at its regional lowest in the western United States. Builders, faced with tightening credit, a surfeit of inventory and anemic sales, will put off starts in the coming months. Residential investment is expected to subtract from GDP growth through the first half of 2008.
WEDNESDAY, October 17th
The Consumer Price Index rose 0.3% in September, higher than an expected gain of 0.2%. Consumer inflation is up 2.8% over the past year. Excluding the often volatile food and energy categories from the index, core consumer prices gained 0.2% on the month, in line with expectations and 2.1% on the year. With inflation in check, future Fed policy actions will lean more toward how economic growth is impacted by the housing market and credit conditions.
New residential construction put in place in September plummeted 10.2% to an annualized pace of 1.19 million. Lower than expected Housing Starts were led by a 34% decrease in the multifamily sector. Single family starts fell 1.7%.
The MBA Mortgage Applications Index rose 0.7% to 656.3% for the week that ended October 12. Total applications are 12.0% above their year ago level. The purchase index gained 2.1% on the week while refinancing applications dropped 1.1%. Application activity will likely remain range bound until the Fed meets at the end of the month.
The Fed's round up of activity in the twelve Federal Reserve Banking Districts known as the beige book showed the economy continued to expand in September and early October, but that the pace of growth moderated in many areas. The anecdotal evidence in this survey proffered little to clarify future monetary policy. Economists and financial markets remain spilt about the Fed’s next rate move.
THURSDAY, October 18th
Mortgage rates were flat to slightly higher this week as the financial markets tried to decipher the Fed's next move amid a mixed bag of economic indicators. 30-year fixed rate mortgages averaged 6.40% this week the same as last week according to Freddie Mac's mortgage market survey.
Jobless Claims jumped 28k to 337k for the week that ended October 13. The surge in initial claims indicates softer labor market conditions with an increased pace of layoffs. Hiring has also been weak. October payrolls are likely to come in under 100k when reported on the first Friday in November.
FRIDAY, October 19th
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 13522.02 14081.05 -559.03 or -3.97%
NASDAQ 2725.16 2800.12 -74.96 or -2.67%
WEEK IN ADVANCE
Housing indicators dominate the economic calendar in the coming week with exiting home sales on Wednesday and new home sales due out Thursday. The Fed believes the housing sector and subsequent credit woes remain some of the central risks to the economy. Further weakness in home sales would tip the scales in favor of another rate cut.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Friday, October 12, 2007
Economic Highlights for the Week Ending October 12, 2007
MONDAY, October 8th
Better than expected job growth in September and an upside surprise in the revision to August payrolls had the markets aggressively scaling back future rate cut expectations. Fed funds futures traders are pricing in roughly a 50/50% chance the FOMC will remain on hold at the end of this month when they meet. While policy adjustments in October remain a coin toss, traders are pricing in a high probability of a quarter point rate cut at the December session.
TUESDAY, October 9th
The September 18 FOMC meeting minutes showed that the Fed voted unanimously to cut rates by a half point. The aggressive action was based on more evidence of an extremely weak housing sector and the Committee's increasing confidence that inflation no longer poses a significant threat to the economy. Policy makers were also concerned about the economic impact of tighter credit conditions and financial market turmoil. The minutes provided little direction in the way of the timing or size of future rate moves.
WEDNESDAY, October 10th
The MBA mortgage applications index rose 2.4% to 652.0% for the week that ended October 5. The purchase index increased 2.1% on the week while the refinance index rose 2.7%. Refinancing accounted for 46% of total applications. Application volumes in the last few weeks remain in a narrow range as many in the market for home financing and refinancing wait to see if further rate cuts by the Fed will help to lower mortgage rates.
THURSDAY , October 11th
Import prices jumped 1.0% in September, in line with expectations. A 5.4% increase in petroleum prices was responsible for the gain in overall import prices last month. Risk remains that surging petroleum prices could pass through to other goods and services. For now though, import price increases remain moderate.
The international trade deficit on goods and services fell 2.4% in August to $57.6 billion from a downwardly revised shortfall of $59.0 billion in July. The improvement in the trade deficit came from stronger exports while imports fell off slightly. Exports are booming because of stronger global economies and the weakening dollar.
Jobless claims fell 12k to 308k for the week that ended October 6, despite widespread layoffs in the home building and lending industries. This indicates hiring in other sectors but job creation remains below trend and is expected to remain soft in the months ahead.
Mortgage rates edged higher this week as the employment figures released last Friday reduced rate cut expectations at the next FOMC meeting in October. 30-year fixed rate mortgages averaged 6.40% this week compared with 6.37% last week according to Freddie Mac's mortgage market survey.
FRIDAY, October 12th
Retail sales rose 0.6% in September better than an expected 0.2% gain. Gasoline and motor vehicle sales were the strongest contributors to total retail sales last month. Excluding motor vehicles, core retail sales increased a strong 0.4%. Household spending is stronger this quarter over last quarter indicating a positive boost to Q3 GDP.
The producer price index surged 1.1% in September much higher than an expected 0.4% increase. Food prices jumped 1.5% while energy prices soared 4.1%. Over the past year the PPI has gained 4.4%. Excluding food and energy from the index the core PPI rose just 0.1% last month and 2.0% over the last year.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 14081.05 14066.01 +15.04 or +0.11%
NASDAQ 2800.12 2780.32 +19.80 or +0.71%
WEEK IN ADVANCE
Data watch is still on for the Fed's upcoming policy decision at the end of the month. The beige book on Wednesday will help to document the Fed's most recent outlook while other indicators of interest include consumer prices and housing starts. So far the data has lessened odds of a rate cut to just 34%. Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Better than expected job growth in September and an upside surprise in the revision to August payrolls had the markets aggressively scaling back future rate cut expectations. Fed funds futures traders are pricing in roughly a 50/50% chance the FOMC will remain on hold at the end of this month when they meet. While policy adjustments in October remain a coin toss, traders are pricing in a high probability of a quarter point rate cut at the December session.
TUESDAY, October 9th
The September 18 FOMC meeting minutes showed that the Fed voted unanimously to cut rates by a half point. The aggressive action was based on more evidence of an extremely weak housing sector and the Committee's increasing confidence that inflation no longer poses a significant threat to the economy. Policy makers were also concerned about the economic impact of tighter credit conditions and financial market turmoil. The minutes provided little direction in the way of the timing or size of future rate moves.
WEDNESDAY, October 10th
The MBA mortgage applications index rose 2.4% to 652.0% for the week that ended October 5. The purchase index increased 2.1% on the week while the refinance index rose 2.7%. Refinancing accounted for 46% of total applications. Application volumes in the last few weeks remain in a narrow range as many in the market for home financing and refinancing wait to see if further rate cuts by the Fed will help to lower mortgage rates.
THURSDAY , October 11th
Import prices jumped 1.0% in September, in line with expectations. A 5.4% increase in petroleum prices was responsible for the gain in overall import prices last month. Risk remains that surging petroleum prices could pass through to other goods and services. For now though, import price increases remain moderate.
The international trade deficit on goods and services fell 2.4% in August to $57.6 billion from a downwardly revised shortfall of $59.0 billion in July. The improvement in the trade deficit came from stronger exports while imports fell off slightly. Exports are booming because of stronger global economies and the weakening dollar.
Jobless claims fell 12k to 308k for the week that ended October 6, despite widespread layoffs in the home building and lending industries. This indicates hiring in other sectors but job creation remains below trend and is expected to remain soft in the months ahead.
Mortgage rates edged higher this week as the employment figures released last Friday reduced rate cut expectations at the next FOMC meeting in October. 30-year fixed rate mortgages averaged 6.40% this week compared with 6.37% last week according to Freddie Mac's mortgage market survey.
FRIDAY, October 12th
Retail sales rose 0.6% in September better than an expected 0.2% gain. Gasoline and motor vehicle sales were the strongest contributors to total retail sales last month. Excluding motor vehicles, core retail sales increased a strong 0.4%. Household spending is stronger this quarter over last quarter indicating a positive boost to Q3 GDP.
The producer price index surged 1.1% in September much higher than an expected 0.4% increase. Food prices jumped 1.5% while energy prices soared 4.1%. Over the past year the PPI has gained 4.4%. Excluding food and energy from the index the core PPI rose just 0.1% last month and 2.0% over the last year.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 14081.05 14066.01 +15.04 or +0.11%
NASDAQ 2800.12 2780.32 +19.80 or +0.71%
WEEK IN ADVANCE
Data watch is still on for the Fed's upcoming policy decision at the end of the month. The beige book on Wednesday will help to document the Fed's most recent outlook while other indicators of interest include consumer prices and housing starts. So far the data has lessened odds of a rate cut to just 34%. Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Saturday, October 06, 2007
Economic Highlights for the Week Ending October 5, 2007
MONDAY, October 1st
Rate cut expectations remained unchanged since last week however they are leaning toward two more rate cuts this year, at the October and December meetings. Fed funds futures traders are pricing in a 74% chance of a quarter point rate cut at the end of this month and 54% odds of another one December 11.
The ISM manufacturing index fell to 52.0% in September compared to expectations for a slightly smaller decline to 52.5%. This is the third straight monthly decline in the index leaving it at a level that is consistent with only modest growth in the manufacturing sector.
TUESDAY, October 2nd
September motor vehicle sales dropped slightly from August to an annual rate of 16.2 million units. Car sales improved while light truck sales dipped slightly. However indications point to sales for the year falling to their lowest pace since 1998. There is downward pressure on vehicle sales due to eroding credit quality and a paucity of available home equity that could be used for new vehicle purchases.
The NAR’s pending home sales index fell to 85.5 in August, a decline of 6.5% from July and down 21.5% from a year ago. The index tracks the number of signed contracts that have not yet closed and is considered a leading indicator of existing home sales. Housing demand is expected to remain weak under deteriorating credit conditions and tighter lending standards.
WEDNESDAY, October 3rd
The ISM non-manufacturing index fell a point to 54.8% in September, matching expectations. Service industry employment gained last month, surprising given that construction, mortgage and financial services are included in the sector, while prices accelerated. The index level is consistent with moderate expansion in the service sector, though on a trend basis, growth is mildly slower.
The MBA mortgage applications index fell 2.7% to 636.7%. The purchase index slipped 1.8% on the week as the refinance index dropped 3.8%. On the whole, mortgage application volumes remain little changed from their year ago level. Those seeking home financing / refinancing may be waiting for lower rates to kick in before submitting an application. As rates move lower expect the mortgage applications to increase.
THURSDAY, October 4th
After rising for three straight weeks, long term mortgage rates eased slightly this week as credit woes and the housing market correction weakened the economic outlook. 30-year fixed rate mortgages averaged 6.37% this week compared to 6.42% last week according to Freddie Mac's mortgage market survey.
Jobless claims rose 16k to 317k for the week ending September 29. Initial claims have averaged 318k a week so far in 2007 compared to 313k a week in 2006. Below trend job growth is expected to continue in the months ahead.
FRIDAY, October 5th
Payroll employment jumped 110k in September, a bit better than expected. Moreover, the 4k decline in August was upwardly revised to show a gain of 89k jobs. Even with the measurable improvement in the last two months, job creation continues to trend lower. Payrolls are being added at roughly half of last year's pace, related to but not entirely due to the housing market correction and financial market turmoil. The unemployment rate edged higher last month to 4.7% of the workforce, also a reflection of a slower pace of job creation.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 14066.01 13895.63 +170.38 or +1.23%
NASDAQ 2780.32 2701.50 +78.82 or +2.92%
WEEK IN ADVANCE
September payrolls and revisions to August job tallies bring some intrigue to the next FOMC rate adjustment. A rate cut at the end of this month is not a done deal. Economic data between now and the end of the month will continue to shape the interest rate outlook. The economic calendar is back loaded in the coming week with retail sales and producer prices on Friday the main market movers.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Rate cut expectations remained unchanged since last week however they are leaning toward two more rate cuts this year, at the October and December meetings. Fed funds futures traders are pricing in a 74% chance of a quarter point rate cut at the end of this month and 54% odds of another one December 11.
The ISM manufacturing index fell to 52.0% in September compared to expectations for a slightly smaller decline to 52.5%. This is the third straight monthly decline in the index leaving it at a level that is consistent with only modest growth in the manufacturing sector.
TUESDAY, October 2nd
September motor vehicle sales dropped slightly from August to an annual rate of 16.2 million units. Car sales improved while light truck sales dipped slightly. However indications point to sales for the year falling to their lowest pace since 1998. There is downward pressure on vehicle sales due to eroding credit quality and a paucity of available home equity that could be used for new vehicle purchases.
The NAR’s pending home sales index fell to 85.5 in August, a decline of 6.5% from July and down 21.5% from a year ago. The index tracks the number of signed contracts that have not yet closed and is considered a leading indicator of existing home sales. Housing demand is expected to remain weak under deteriorating credit conditions and tighter lending standards.
WEDNESDAY, October 3rd
The ISM non-manufacturing index fell a point to 54.8% in September, matching expectations. Service industry employment gained last month, surprising given that construction, mortgage and financial services are included in the sector, while prices accelerated. The index level is consistent with moderate expansion in the service sector, though on a trend basis, growth is mildly slower.
The MBA mortgage applications index fell 2.7% to 636.7%. The purchase index slipped 1.8% on the week as the refinance index dropped 3.8%. On the whole, mortgage application volumes remain little changed from their year ago level. Those seeking home financing / refinancing may be waiting for lower rates to kick in before submitting an application. As rates move lower expect the mortgage applications to increase.
THURSDAY, October 4th
After rising for three straight weeks, long term mortgage rates eased slightly this week as credit woes and the housing market correction weakened the economic outlook. 30-year fixed rate mortgages averaged 6.37% this week compared to 6.42% last week according to Freddie Mac's mortgage market survey.
Jobless claims rose 16k to 317k for the week ending September 29. Initial claims have averaged 318k a week so far in 2007 compared to 313k a week in 2006. Below trend job growth is expected to continue in the months ahead.
FRIDAY, October 5th
Payroll employment jumped 110k in September, a bit better than expected. Moreover, the 4k decline in August was upwardly revised to show a gain of 89k jobs. Even with the measurable improvement in the last two months, job creation continues to trend lower. Payrolls are being added at roughly half of last year's pace, related to but not entirely due to the housing market correction and financial market turmoil. The unemployment rate edged higher last month to 4.7% of the workforce, also a reflection of a slower pace of job creation.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 14066.01 13895.63 +170.38 or +1.23%
NASDAQ 2780.32 2701.50 +78.82 or +2.92%
WEEK IN ADVANCE
September payrolls and revisions to August job tallies bring some intrigue to the next FOMC rate adjustment. A rate cut at the end of this month is not a done deal. Economic data between now and the end of the month will continue to shape the interest rate outlook. The economic calendar is back loaded in the coming week with retail sales and producer prices on Friday the main market movers.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Monday, October 01, 2007
Economic Highlights for the Week Ending September 28, 2007
MONDAY, September 24th
The FOMC policy statement last week indicated an easing bias going forward as the Fed works to avoid a sharp downturn in the economy. Fed funds futures traders are pricing in a 72% chance of a quarter point rate cut at the next meeting at the end of October and 55% odds of another rate cut in December. Housing and inflation reports due out this week could affect the interest rate outlook. If the numbers are particularly dismal and are related to recent credit market woes, then it could increase rate cut expectations from here.
TUESDAY, September 25th
Existing home sales decreased by 4.3% in August from the previous month, resulting in a year-over-year decline of 13%. Sales are at their slowest pace since 2002, with condo sales plummeting at a faster rate than single-family homes. The slump increased the supply of homes available to 10 months, an inventory level that rivals the housing downturn in the early 90s. The median existing house price is on par with year ago levels but data may be slightly misleading because of a change in the mix of homes sold.
According to the S&P/Case-Shiller Monthly home price index, the 10-metro house price index decreased 4.5% year-to-year in July while the 20-metro index dropped 3.9%. The highly regarded report tracks repeat sales of the same houses over time. It also captures non-conforming loans, those over $417,000, and includes high-priced homes and expensive coastal areas. The number of optimistic survey responses is the lowest for any period of time in the 22 years of the survey.
WEDNESDAY, September 26th
The MBA mortgage applications index fell 2.8% to 654.2 for the week that ended September 21. The purchase index fell 7.3% on the week while refinance applications increased 3.3%. The slight uptick in mortgage rates last week dampened purchase activity with many buyers possibly holding off until the Fed rate cuts pass through to longer term rates. Refinancing is holding up because of the high number of mortgagors encountering resets.
THURSDAY, September 27th
New home sales declined 8.3% in August to an annual rate of 795k, much lower than an expected rate of 830k. This was the lowest level of new home sales since June 2000. Over the past year sales have tumbled 21.2% and are now 42.8% below their July 2005 peak.
Jobless claims fell 15k to 298k in the week that ended September 22. Claims, which have moved into a new lower range over the past several weeks, suggest improved labor market conditions. Payroll employment figures due out next Friday should reflect a moderate pace of hiring in September as opposed to the net contraction in August jobs.
Long term mortgage rates turned higher in the past week as long term yields in the bond market moved higher. The Fed rate cut thus far has lowered shorter dated instruments. 30-year fixed rate mortgages averaged 6.42% this week compared to 6.34% last week according to Freddie Mac's mortgage market survey. One year ARMs decreased to 5.60% from 5.65% in the previous week.
FRIDAY, September 28th
Personal income rose 0.3% in August slightly below expectations of a 0.4% increase. Consumer spending gained 0.6% on the month, up from 0.4% in the prior month and above expectations. Over the past year incomes have grown 6.8% while spending gained 5.7%. A closely watched inflation gauge in this data series, the core PCE deflator, rose a mild 0.1% for the month and 1.8% for the year, well within the Fed's comfort zone for inflation.
Construction spending rose 0.2% in August better than expectations for a decline of 0.2%. A huge 2.3% rise in non-residential construction spending carried the overall gain during August. Spending was quite robust for commercial, office, health care and other types of buildings. Residential construction expenditures remained weak, falling 1.5% during the month.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 13895.63 13378.87 +516.78 or +3.86%
NASDAQ 2701.50 2576.69 +124.81 or +4.84%
WEEK IN ADVANCE
The tumultuous third quarter has wrapped up for financial markets but end of quarter economic data will come in over the next month. In the coming week data flows are light but significant with the ISM manufacturing survey, Monday and the employment report due out Friday.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
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