MONDAY, February 18th
PRESIDENTS DAY All Markets Closed
TUESDAY, February 19th
The NAHB housing market index increased to 20 in February from a record low reading of 19 in January. Home builders rated present, single-family home sales just slightly better, as ratings of sales six months from now, declined. Foot traffic through model homes increased, basically accounting for the overall gain in the index. While the index level is no where near a recovery level, at least it has moved off of its all time low.
With the risks to growth still biased toward weakening, financial markets are expecting another large cut from the Fed next month. Fed funds futures traders are fully pricing in a 50 basis point rate cut when the FOMC meets March 18. That would bring the target for the fed funds rate down to 2.50% from its current level of 3.00%.
WEDNESDAY, February 20th
The consumer price index rose 0.4% in January compared to expectations for a 0.3% gain. Price pressures were broad based, with significant increases in all categories. The CPI has gained 4.4% over the past year. The core CPI, which excludes food and energy costs, increased 0.3% on the month and 2.5% on the year. The above-trend rise in inflation is worrisome to the Fed and could complicate their rate decision in March.
New residential construction starts rebounded slightly in January from a very sharp decline in December, only because of a surge in the highly volatile multifamily category. Housing starts increased 0.8% in January to an annual pace of 1.01 million units, up slightly from a rate of 1.00 million units in December. Expect residential construction activity to remain soft through the first half of the year then hopefully start to respond to rate cuts in the pipeline in the second half of 2008.
The January 29-30 FOMC meeting minutes stressed risks to growth remained even after a series of aggressive rate cuts last month. They also confirmed that there was a great deal of uncertainty in the economic outlook. With regard to financial markets they acknowledged improvement but that strain remained and credit was more restrictive. Inflation data had been disappointing to the Committee, but they hoped that price pressures would ease under sluggish economic conditions. The Fed is likely to continue easing aggressively, 50 basis points at the next meeting, as they try to manage a complicated set of risks. Although economists do not consider a strong economic recovery likely, the FOMC, in that situation could reverse policy easing as aggressively as they implemented it.
THURSDAY, February 21st
The index of leading economic indicators fell 0.1% in January after declining by the same amount in December. This was the fourth consecutive monthly decline in the index which is consistent with very sluggish growth, possibly contracting growth in the next few quarters.
Jobless claims fell 9k to 349k for the week ending February 16. The four-week moving average, which smoothes out weekly fluctuations jumped 11k to 361k, confirming an elevated pace of layoffs and weakened labor market conditions.
Long term fixed mortgage rates shot higher this week as the one-year adjustable rates edged lower. Yields in the bond market have been moving in a similar fashion as traders sort through rate cut expectations, inflation fears, credit market turmoil and contracting economic growth. 30-year fixed rate mortgages averaged 6.04% this week compared to 5.72% last week according to Freddie Mac’s mortgage market survey. The average one-year ARM dropped below the 5.0% level to 4.98%.
FRIDAY, February 22nd
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12381.02 12348.21 +32.81 or +0.27%
NASDAQ 2303.35 2321.80 -18.45 or -0.79%
WEEK IN ADVANCE
It appears the Fed has to cope with the opposing forces of rising inflation pressures and downside risks to economic growth. For now, the latter takes precedence when deciding policy. The data will be watched closely in the meantime for any shifts in bias. Home sales and producer prices in the coming week will provide the latest economic & inflation readings.
Tuesday, February 26, 2008
Monday, February 18, 2008
Should Buyers Wait for the Market Bottom?
The housing market will continue its downward spiral, forecasts say, and that means opportunities for buyers. But waiting for the market bottom may not be the smartest strategy. Here are 5 reasons to buy now -- and 5 reasons you may want to wait.
By Melinda Fulmer, MSN Real Estate
5 REASONS TO BUY
1. Prices in the neighborhood you are interested in are relatively stable. Either they are holding their own or increasing, or the pace of decline is slowing significantly. If you have to move and don't like apartments, the small penalty you pay for missing the bottom may not mean much.
2. You plan to stay in the home for more than five years. If you can stick it out that long before selling, economists say you’ll probably ride out any downturn and come out ahead on price.
3. Your rent rivals a mortgage payment. If you can afford to buy, it can give you one bonus that renting can't: the mortgage-interest deduction on your taxes.
4. You've found the right house in the right area for you. The schools are great. You love the area and know it would be hard to find another house like the one you have your eye on. In a better market, you would most likely have much more competition for that home.
5. You've built equity in your house and are moving to a place where homes are cheaper. In your new market, your money will go a lot further.
5 REASONS TO HOLD OFF
1. You've lived in your house less than two years. Chances are you haven't had enough time to accumulate equity in your home. Indeed, you may have negative equity, if you live in many areas such as California, Florida, Arizona or Nevada.
2. Your job security is uncertain. If your company or business is in distress, it's probably better to stay put until the smoke clears.
3. You don't plan to stay in your next house at least five years. While it's not important to buy at the exact bottom of the market, it is important to stay long enough to ride it out completely.
4. You don't have good credit or a decent down payment. Do you have a job and income you can document? As a result of the subprime lending crisis, lenders are much more careful about whom they're giving their money to.
5. You have an existing home to sell in a neighborhood where prices are dropping precipitously or where the number of foreclosures is spiking. In this climate, you're probably better off waiting out the storm. Courtesy of Laurie Marlowe LandAmerica Capital Title
By Melinda Fulmer, MSN Real Estate
5 REASONS TO BUY
1. Prices in the neighborhood you are interested in are relatively stable. Either they are holding their own or increasing, or the pace of decline is slowing significantly. If you have to move and don't like apartments, the small penalty you pay for missing the bottom may not mean much.
2. You plan to stay in the home for more than five years. If you can stick it out that long before selling, economists say you’ll probably ride out any downturn and come out ahead on price.
3. Your rent rivals a mortgage payment. If you can afford to buy, it can give you one bonus that renting can't: the mortgage-interest deduction on your taxes.
4. You've found the right house in the right area for you. The schools are great. You love the area and know it would be hard to find another house like the one you have your eye on. In a better market, you would most likely have much more competition for that home.
5. You've built equity in your house and are moving to a place where homes are cheaper. In your new market, your money will go a lot further.
5 REASONS TO HOLD OFF
1. You've lived in your house less than two years. Chances are you haven't had enough time to accumulate equity in your home. Indeed, you may have negative equity, if you live in many areas such as California, Florida, Arizona or Nevada.
2. Your job security is uncertain. If your company or business is in distress, it's probably better to stay put until the smoke clears.
3. You don't plan to stay in your next house at least five years. While it's not important to buy at the exact bottom of the market, it is important to stay long enough to ride it out completely.
4. You don't have good credit or a decent down payment. Do you have a job and income you can document? As a result of the subprime lending crisis, lenders are much more careful about whom they're giving their money to.
5. You have an existing home to sell in a neighborhood where prices are dropping precipitously or where the number of foreclosures is spiking. In this climate, you're probably better off waiting out the storm. Courtesy of Laurie Marlowe LandAmerica Capital Title
Friday, February 15, 2008
Economic Highlights for the Week Ending February 15, 2008
MONDAY, February 11th
The possibility of contracting growth in Q1 has financial markets believing that the FOMC will continue to cut rates in an effort to stimulate economic activity. Fed funds futures traders are fully pricing in a 50 basis point rate cut when policymakers meet March 18. That would take the fed funds target rate to 2.50% from 3.00% currently.
TUESDAY, February 12th
The Treasury posted a budget surplus of $17.8 billion in January compared to a $38.2 billion surplus in January a year ago. Fiscal year to date, the government is running a deficit of $87.7 billion vs. a $45.5 billion deficit for the same period last year. After improving in the last few years, the budget deficit is widening once again.
Warren Buffett’s offer to cover $800 billion in municipal bonds guaranteed by several ailing bond insurers sapped buying in the bond market Tuesday. The offer was perceived as a stabilizing force in the muni market and traders unwound some of the safety bid in response. The 10-year note was down 11/32 to 98-21/32 to yield 3.66%.
WEDNESDAY, February 13th
Retail sales increased 0.3% in January, besting expectations for a decline of 0.3%. The surprising gain was led by strong demand for motor vehicles and gasoline. There were some pockets of weakness with building supply, electronic/appliance, sports/hobby and furniture stores posting monthly declines. Excluding cars and gas, core retail sales were unchanged last month. The outlook is for consumer spending to remain weak through the first half of this year as consumers contend with sluggish job growth, higher energy prices and the effects of the housing downturn.
The MBA mortgage applications index fell 2.1% to 1063.5% for the week ending February 8. The purchase index slipped 0.3% on the week as the refinancing index dropped 3.0%. The pullback in mortgage application activity is related to the recent uptick in mortgage rates. Refinance applications accounted for 67.4% of total application volume.
The economic stimulus package became official today with tax rebate checks scheduled to be sent out, starting in May. The timing of the stimulus combined with the Fed’s most recent rate cuts will not necessarily prevent a recession but will help to minimize and shorten one. Economists at Moody’s Economy.com project that the stimulus package and a fed funds rate of 2.5% by mid-year will boost GDP growth by 2.0% in the second half of 2008.
THURSDAY, February 14th
The NAR reported that the national median price of an existing single family home fell to $206,200 in Q4, down 5.8% from the fourth quarter of 2006 when the median price was $219,300. While that is the largest quarterly decline on record the NAR’s chief economist points out that roughly half of the 150 major metro areas tracked in this data series showed rising home prices in the fourth quarter of last year.
Jobless claims fell 9k to 348k for the week ending February 9. The level of claims, unaffected by seasonal or holiday distortions last week, remains on an upward trend, indicating an elevated pace of layoffs.
The international trade deficit on goods and services shrank to $58.8 billion in December from a shortfall of $63.1 billion in November. The improvement in the trade picture is due to increasing exports, related to a weaker dollar while imports declined because of slower economic growth here at home. For all of 2007, the trade deficit totaled $711.6 billion, 6.2% less than in 2006.
FRIDAY, February 15th
Import prices jumped 1.7% in January compared to consensus expectation for a 0.5% increase. A 5.5% advance in petroleum prices led the overall gain last month however there were also some non-fuel price related pressures. Over the past year import prices have increased 13.7% - the highest year-on-year increase in 25 years of record keeping. Elevated import prices have the potential to be passed through to consumer and producer prices as well.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12348.21 12182.13 +166.08 or +1.36%
NASDAQ 2321.80 2304.85 +16.95 or +0.73%
WEEK IN ADVANCE
Data will be monitored closely in the weeks ahead as financial markets, economists and the Fed grapple with the current state of the economy and pin down the outlook. Housing indicators and consumer prices feature prominently on the this week's economic calendar.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
The possibility of contracting growth in Q1 has financial markets believing that the FOMC will continue to cut rates in an effort to stimulate economic activity. Fed funds futures traders are fully pricing in a 50 basis point rate cut when policymakers meet March 18. That would take the fed funds target rate to 2.50% from 3.00% currently.
TUESDAY, February 12th
The Treasury posted a budget surplus of $17.8 billion in January compared to a $38.2 billion surplus in January a year ago. Fiscal year to date, the government is running a deficit of $87.7 billion vs. a $45.5 billion deficit for the same period last year. After improving in the last few years, the budget deficit is widening once again.
Warren Buffett’s offer to cover $800 billion in municipal bonds guaranteed by several ailing bond insurers sapped buying in the bond market Tuesday. The offer was perceived as a stabilizing force in the muni market and traders unwound some of the safety bid in response. The 10-year note was down 11/32 to 98-21/32 to yield 3.66%.
WEDNESDAY, February 13th
Retail sales increased 0.3% in January, besting expectations for a decline of 0.3%. The surprising gain was led by strong demand for motor vehicles and gasoline. There were some pockets of weakness with building supply, electronic/appliance, sports/hobby and furniture stores posting monthly declines. Excluding cars and gas, core retail sales were unchanged last month. The outlook is for consumer spending to remain weak through the first half of this year as consumers contend with sluggish job growth, higher energy prices and the effects of the housing downturn.
The MBA mortgage applications index fell 2.1% to 1063.5% for the week ending February 8. The purchase index slipped 0.3% on the week as the refinancing index dropped 3.0%. The pullback in mortgage application activity is related to the recent uptick in mortgage rates. Refinance applications accounted for 67.4% of total application volume.
The economic stimulus package became official today with tax rebate checks scheduled to be sent out, starting in May. The timing of the stimulus combined with the Fed’s most recent rate cuts will not necessarily prevent a recession but will help to minimize and shorten one. Economists at Moody’s Economy.com project that the stimulus package and a fed funds rate of 2.5% by mid-year will boost GDP growth by 2.0% in the second half of 2008.
THURSDAY, February 14th
The NAR reported that the national median price of an existing single family home fell to $206,200 in Q4, down 5.8% from the fourth quarter of 2006 when the median price was $219,300. While that is the largest quarterly decline on record the NAR’s chief economist points out that roughly half of the 150 major metro areas tracked in this data series showed rising home prices in the fourth quarter of last year.
Jobless claims fell 9k to 348k for the week ending February 9. The level of claims, unaffected by seasonal or holiday distortions last week, remains on an upward trend, indicating an elevated pace of layoffs.
The international trade deficit on goods and services shrank to $58.8 billion in December from a shortfall of $63.1 billion in November. The improvement in the trade picture is due to increasing exports, related to a weaker dollar while imports declined because of slower economic growth here at home. For all of 2007, the trade deficit totaled $711.6 billion, 6.2% less than in 2006.
FRIDAY, February 15th
Import prices jumped 1.7% in January compared to consensus expectation for a 0.5% increase. A 5.5% advance in petroleum prices led the overall gain last month however there were also some non-fuel price related pressures. Over the past year import prices have increased 13.7% - the highest year-on-year increase in 25 years of record keeping. Elevated import prices have the potential to be passed through to consumer and producer prices as well.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12348.21 12182.13 +166.08 or +1.36%
NASDAQ 2321.80 2304.85 +16.95 or +0.73%
WEEK IN ADVANCE
Data will be monitored closely in the weeks ahead as financial markets, economists and the Fed grapple with the current state of the economy and pin down the outlook. Housing indicators and consumer prices feature prominently on the this week's economic calendar.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Saturday, February 09, 2008
Economic Highlights for the Week Ending February 8, 2008
MONDAY, February 4th
The Federal Reserve’s Senior Loan Officer Survey showed weaker demand and tighter lending standards for both residential and commercial mortgages, from nontraditional to prime, in January. A net 52.9% of respondents reported tighter credit standards on prime mortgages, compared to 40.8% in the previous survey and well above the 15% reported in Q207. Additionally, most respondents expect further deterioration in credit quality in 2008.
TUESDAY, February 5th
The ISM non-manufacturing index fell sharply in January to 41.9% from a reading of 54.4% in December. The service sector has long been a stable support to economic growth but the latest data indicate contraction the service industries and are consistent with recession in the overall economy.
The service sector encompasses almost 90% of the economy so today’s steep plunge into receding territory spooked the financial markets and increased rate cut expectations. Fed funds futures were pricing in a 76% probability today that the Fed would cut the fed funds rate by a half point before the next FOMC meeting, March 18. Just yesterday, 80% of bets were placed on the Fed cutting by a quarter-point the next time they meet in March.
WEDNESDAY, February 6th
Productivity grew at a 1.8% rate in the fourth quarter better than an expected rate of 1.0%. The gain in productivity last quarter was a result of strong output but fewer hours worked to achieve that output. Unit labor costs rose just 2.1% last quarter and were up a mild 1.0% over the past year. Stronger productivity without higher labor costs is good news for inflation.
The MBA mortgage applications index gained 3.0% to 1086.6% for the week ending February 1. The purchase index jumped 12% during the week while the refinance index fell 1.0%. Refinancing applications accounted for 69.2% of all mortgage applications. Lower rates continue to drive total mortgage application activity which remains 72.4% above its year ago level.
THURSDAY, February 7th
Chain store sales at stores open at least one year rose just 0.5% in January according to an index compiled by the International Council of Shopping Centers. This was the weakest January on record for the ICSC and follows a downbeat holiday shopping season. Apparel, department and furniture stores posted big declines last month while drug stores and wholesale clubs reported strong gains. With consumer finances under pressure, the outlook for same store sales remains weak.
Consumer credit increased in December by a very modest $4.5 billion after an outsized increase of $17.1 billion in November. It brings the annual rate of growth in consumer credit down to 2.1%. Consumers used both revolving and non-revolving forms of credit modestly in December. Credit usage is expected to slow further as consumers deal with tighter credit, weaker housing and sluggish job growth.
Jobless claims fell 22k to 356k for the week ending February 2. The downshift in initial claims is not surprising given the huge run-up last week. Nevertheless, the level of claims remains elevated indicating acceleration in the pace of layoffs.
The NAR’s pending home sales index fell 1.5% in December to 85.9%. The index has dropped 24.2% from a year ago. Declines in the index suggest further weakening in existing homes sales in the months to come.
FRIDAY, February 8th
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12182.13 12743.19 -561.06 or -4.40%
NASDAQ 2304.85 2413.36 -108.51 or -4.49%
WEEK IN ADVANCE
Amid much uncertainty and volatility in the financial markets, market players, economists and analysts will look to the data in the coming weeks for a handle on the economic outlook and monetary policy. Retail sales data in the week ahead stands out among the reports as most critical because two-thirds of all economic activity is based on consumer spending.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
The Federal Reserve’s Senior Loan Officer Survey showed weaker demand and tighter lending standards for both residential and commercial mortgages, from nontraditional to prime, in January. A net 52.9% of respondents reported tighter credit standards on prime mortgages, compared to 40.8% in the previous survey and well above the 15% reported in Q207. Additionally, most respondents expect further deterioration in credit quality in 2008.
TUESDAY, February 5th
The ISM non-manufacturing index fell sharply in January to 41.9% from a reading of 54.4% in December. The service sector has long been a stable support to economic growth but the latest data indicate contraction the service industries and are consistent with recession in the overall economy.
The service sector encompasses almost 90% of the economy so today’s steep plunge into receding territory spooked the financial markets and increased rate cut expectations. Fed funds futures were pricing in a 76% probability today that the Fed would cut the fed funds rate by a half point before the next FOMC meeting, March 18. Just yesterday, 80% of bets were placed on the Fed cutting by a quarter-point the next time they meet in March.
WEDNESDAY, February 6th
Productivity grew at a 1.8% rate in the fourth quarter better than an expected rate of 1.0%. The gain in productivity last quarter was a result of strong output but fewer hours worked to achieve that output. Unit labor costs rose just 2.1% last quarter and were up a mild 1.0% over the past year. Stronger productivity without higher labor costs is good news for inflation.
The MBA mortgage applications index gained 3.0% to 1086.6% for the week ending February 1. The purchase index jumped 12% during the week while the refinance index fell 1.0%. Refinancing applications accounted for 69.2% of all mortgage applications. Lower rates continue to drive total mortgage application activity which remains 72.4% above its year ago level.
THURSDAY, February 7th
Chain store sales at stores open at least one year rose just 0.5% in January according to an index compiled by the International Council of Shopping Centers. This was the weakest January on record for the ICSC and follows a downbeat holiday shopping season. Apparel, department and furniture stores posted big declines last month while drug stores and wholesale clubs reported strong gains. With consumer finances under pressure, the outlook for same store sales remains weak.
Consumer credit increased in December by a very modest $4.5 billion after an outsized increase of $17.1 billion in November. It brings the annual rate of growth in consumer credit down to 2.1%. Consumers used both revolving and non-revolving forms of credit modestly in December. Credit usage is expected to slow further as consumers deal with tighter credit, weaker housing and sluggish job growth.
Jobless claims fell 22k to 356k for the week ending February 2. The downshift in initial claims is not surprising given the huge run-up last week. Nevertheless, the level of claims remains elevated indicating acceleration in the pace of layoffs.
The NAR’s pending home sales index fell 1.5% in December to 85.9%. The index has dropped 24.2% from a year ago. Declines in the index suggest further weakening in existing homes sales in the months to come.
FRIDAY, February 8th
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12182.13 12743.19 -561.06 or -4.40%
NASDAQ 2304.85 2413.36 -108.51 or -4.49%
WEEK IN ADVANCE
Amid much uncertainty and volatility in the financial markets, market players, economists and analysts will look to the data in the coming weeks for a handle on the economic outlook and monetary policy. Retail sales data in the week ahead stands out among the reports as most critical because two-thirds of all economic activity is based on consumer spending.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Saturday, February 02, 2008
Economic Highlights for the Week Ending February 1, 2008
MONDAY, January 28th
Sales of new single-family homes fell 4.7% in December to an annual pace of 604,000 units. Sales were weaker than expected last month and follow a downward revision in November. For all of 2007 new home sales totaled 773,000, down 26.3% from 2006 and their lowest since 1996 when 756,000 new homes were sold.
TUESDAY, January 29th
The S&P/Case-Shiller 10-city and 20-city composite indexes fell 2.2% and 2.1% in November from October. In fact, prices declined in all 20 major metro areas in November. Over the past year the 10-city house price index fell 8.4%, the largest yearly decline since the index began in 1988. The 20-city index dropped 7.7% over the past year. Downward pressure on prices is expected to continue through this year under weak housing market conditions.
WEDNESDAY, January 30th
The advance estimate of GDP indicated that the economy grew at a weak 0.6% pace in the fourth quarter. It was about half of consensus expectations. Over the past year, the economy expanded at a 2.5% rate of growth, its slowest pace since 2002. Weakness was concentrated in residential and inventory investment while consumer and business spending slowed, as did export growth. Economic growth is expected to remain weak and could possibly contract in the first quarter. Economy-wide inflation measured by the GDP price index rose 2.6% in Q4 due to higher energy prices.
The MBA mortgage applications index rose 7.5% to 1054.9% for the week that ended January 25. Total applications remain 67.2% higher than year ago levels. Last week, the purchase index fell 17.7% while the refinance index gained 22.1%. Lower rates continue to support refinancing activity, which accounted for 73% of total applications.
The FOMC backed up last week’s surprise 75 basis point cut with an additional 50 basis point cut at the conclusion of their regularly scheduled policy meeting today. The target for the fed funds rate now stands at 3.00%. The Fed also cut the discount rate by a half-point to 3.50%. The Fed acted decisively and aggressively, easing monetary policy by 1 ¼ points in a little over a week to help stave off a recession, and if not, certainly shorten one.
THURSDAY, January 31st
Personal income rose 0.5% in December as consumer spending increased 0.2%. Incomes grew at a solid rate of 5.8% in 2007 while spending grew at a 5.7% rate – still in line with long term averages. A closely watched inflation gauge contained in this data series, the core PCE price deflator rose 0.2% on the month and 2.2% on the year. The yearly rate remains above the Fed’s preferred target for inflation.
Jobless claims jumped 69k to 375k for the week ending January 26. Volatility in claims data last week, in part, could be holiday related. If claims were to stay at this elevated level for several weeks it would indicate severe deterioration in labor market conditions.
After falling sharply in the past four weeks, fixed mortgage rates rose this week. Mortgage rates were largely following movements in Treasuries yields during the week. 30-year fixed rate mortgages averaged 5.68% this week compared to 5.48% last week according to Freddie Mac’s mortgage market survey. Economists at Freddie Mac point out that despite the bump in rates this week, rates remain historically low. The 30-year fixed rate mortgage averaged 6.34% in the same week last year.
FRIDAY, February 1st
Payroll employment actually fell in January, posting a net loss of 17,000 jobs. This was way below expectations for a 75,000 job gain last month. December’s job gains were revised significantly higher to 82,000 from an initial estimate of 18.000. Still, labor market weakness is apparent with 2007’s job gains only slightly more than half of job growth in 2006. The unemployment rate dipped to 4.9% of the workforce. These data reinforce the Fed’s latest moves and set up for more easing to come.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12743.19 12207.17 +536.02 or +4.39%
NASDAQ 2413.36 2326.20 +87.16 or +3.75%
WEEK IN ADVANCE
After a ton of data and significant policy action in the past two weeks, all economic and Fed activity downshifts in the coming week providing the financial markets time to reflect and regroup
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Economic Highlights for the Week Ending February 1, 2008
MONDAY, January 28th
Sales of new single-family homes fell 4.7% in December to an annual pace of 604,000 units. Sales were weaker than expected last month and follow a downward revision in November. For all of 2007 new home sales totaled 773,000, down 26.3% from 2006 and their lowest since 1996 when 756,000 new homes were sold.
TUESDAY, January 29th
The S&P/Case-Shiller 10-city and 20-city composite indexes fell 2.2% and 2.1% in November from October. In fact, prices declined in all 20 major metro areas in November. Over the past year the 10-city house price index fell 8.4%, the largest yearly decline since the index began in 1988. The 20-city index dropped 7.7% over the past year. Downward pressure on prices is expected to continue through this year under weak housing market conditions.
WEDNESDAY, January 30th
The advance estimate of GDP indicated that the economy grew at a weak 0.6% pace in the fourth quarter. It was about half of consensus expectations. Over the past year, the economy expanded at a 2.5% rate of growth, its slowest pace since 2002. Weakness was concentrated in residential and inventory investment while consumer and business spending slowed, as did export growth. Economic growth is expected to remain weak and could possibly contract in the first quarter. Economy-wide inflation measured by the GDP price index rose 2.6% in Q4 due to higher energy prices.
The MBA mortgage applications index rose 7.5% to 1054.9% for the week that ended January 25. Total applications remain 67.2% higher than year ago levels. Last week, the purchase index fell 17.7% while the refinance index gained 22.1%. Lower rates continue to support refinancing activity, which accounted for 73% of total applications.
The FOMC backed up last week’s surprise 75 basis point cut with an additional 50 basis point cut at the conclusion of their regularly scheduled policy meeting today. The target for the fed funds rate now stands at 3.00%. The Fed also cut the discount rate by a half-point to 3.50%. The Fed acted decisively and aggressively, easing monetary policy by 1 ¼ points in a little over a week to help stave off a recession, and if not, certainly shorten one.
THURSDAY, January 31st
Personal income rose 0.5% in December as consumer spending increased 0.2%. Incomes grew at a solid rate of 5.8% in 2007 while spending grew at a 5.7% rate – still in line with long term averages. A closely watched inflation gauge contained in this data series, the core PCE price deflator rose 0.2% on the month and 2.2% on the year. The yearly rate remains above the Fed’s preferred target for inflation.
Jobless claims jumped 69k to 375k for the week ending January 26. Volatility in claims data last week, in part, could be holiday related. If claims were to stay at this elevated level for several weeks it would indicate severe deterioration in labor market conditions.
After falling sharply in the past four weeks, fixed mortgage rates rose this week. Mortgage rates were largely following movements in Treasuries yields during the week. 30-year fixed rate mortgages averaged 5.68% this week compared to 5.48% last week according to Freddie Mac’s mortgage market survey. Economists at Freddie Mac point out that despite the bump in rates this week, rates remain historically low. The 30-year fixed rate mortgage averaged 6.34% in the same week last year.
FRIDAY, February 1st
Payroll employment actually fell in January, posting a net loss of 17,000 jobs. This was way below expectations for a 75,000 job gain last month. December’s job gains were revised significantly higher to 82,000 from an initial estimate of 18.000. Still, labor market weakness is apparent with 2007’s job gains only slightly more than half of job growth in 2006. The unemployment rate dipped to 4.9% of the workforce. These data reinforce the Fed’s latest moves and set up for more easing to come.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12743.19 12207.17 +536.02 or +4.39%
NASDAQ 2413.36 2326.20 +87.16 or +3.75%
WEEK IN ADVANCE
After a ton of data and significant policy action in the past two weeks, all economic and Fed activity downshifts in the coming week providing the financial markets time to reflect and regroup
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Subscribe to:
Comments (Atom)
