MONDAY, April 21st
The size of the next rate cut has been pared back amid better than expected economic readings and improved financial market sentiment related to earnings and the belief that the worst of the credit crisis has passed. Fed funds futures traders are fully pricing in a quarter point rate cut at the conclusion of the two-day FOMC meeting. That would target the fed funds rate at 2.0%.
TUEDAY, April 22nd
Existing home sales fell 2.0% in March to an annual rate of 4.93 million units, in line with market expectations. NAR economists state that sales activity, while uneven at times, has remained within a narrow range since last September, indicating stable but still weak conditions. Support will come in the form of more policy measures, continued low rates and fiscal stimulus later in the year to help offset downside risks of a more severe economic downturn and raucous financial market turmoil.
The Fed has used other tactics besides easing monetary policy to address the credit crisis. One of them, the Term Auction Facility or TAF, which makes 28-day credit available to banks, took place today and drew stronger demand than the first TAF indicating the need for liquidity amid still critical credit market conditions. More lending facilities may be created in an effort to lower interbank lending rates and encourage banks to lend to one another.
WEDNESDAY, April 23rd
The MBA mortgage applications index fell 14.2% to 637.6% for the week ending April 18. The purchase index fell 6.4% on the week as refinancings dropped 20.2%. The decline in application volumes was due to tighter credit, and a substantial jump in mortgage rates.
While a quarter point rate cut is widely expected by the FOMC at their meeting next week, analysts and some economists believe that holding steady on rates would accomplish more for the Fed. It would surprise the markets; help establish the Fed’s inflation fighting credibility, could reverse some of the recent gains in commodity prices and bolster the dollar. The argument is that because rates have fallen so low investors have been buying commodities; that combined with much stronger global demand and industrialization has resulted in what many are calling a commodities bubble.
THURSDAY, April 24th
New home sales plunged 8.5% in March to an annualized pace of 526,000, much weaker than an expected pace of 580,000. The sales plunge in March combined with downward revisions in previous months makes the first quarter the worst yet for the housing downturn. Given the high inventory level and weakened demand, declines are expected to continue in the housing sector through this year though, at a gradually diminishing pace.
Jobless claims fell 33k to 342k for the week ending April 19. Even with the weekly drop, the level of claims remains elevated. In 2007, initial claims averaged 322k; thus far in 2008 claims have averaged 353k. Claims and their longer term averages suggest acceleration in the pace of layoffs and a downward trend in the pace of hiring.
Diminished rate cut expectations combined with scattered inflationary pressures have recently raised yields in the bond market which in turn resulted in higher mortgage rates this week. 30-year fixed rate mortgages averaged 6.03% this week compared to 5.88% last week according to Freddie Mac’s mortgage market survey.
FRIDAY, April 25th
Consumer sentiment dropped to 62.6% in April, a 26-year nadir, from 63.2% in mid-April and 69.5% in March. Consumers seem equally anxious about present and future economic circumstances. Sentiment is mired at a level that historically has been associated with recession. Downside risks to consumer attitudes remain in the form falling house prices, high energy prices, sluggish job growth and tighter credit.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12891.86 12849.36 +42.50 or +0.33%
NASDAQ 2422.93 2402.97 +19.96 or 0.83%
WEEK IN ADVANCE
The economic calendar is busy again in the coming week and provides the advance estimate for Q1 GDP as well as the first readings on payrolls, manufacturing and consumer spending starting off the second quarter. Also, the FOMC holds a two-day policy meeting, where a quarter-point rate cut is widely expected. The policy statement is due out Wednesday afternoon. Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Sunday, April 27, 2008
Monday, April 21, 2008
MONDAY, April 14th
MONDAY, April 14th
Retail sales gained 0.2% in March, driven by sales at gas stations, sporting goods stores, restaurants and bars. Weakness was concentrated in home-related product stores such as furniture, building materials and garden supplies. Even with the gain last month, longer term spending trends remain very weak as consumers cope with job losses, falling home values, high energy prices and tighter credit.
TUESDAY, April 15th
The producer price index jumped 1.1% in March, nearly twice consensus estimates, as food and energy prices surged during the month. Excluding food and energy prices, the core PPI rose 0.2% last month as expected. Over the past year the PPI surged 6.9% as core wholesale prices increased 2.8%, near a cyclical high. Looking ahead, inflationary pressures should recede under weak economic conditions.
The NAHB housing market index was unchanged at a level of 20 in April, the same as in March and February. The composition of the index components changed, though, with lower ratings for present single-family home sales while sales six months from now was tracking higher. Foot traffic through model homes increased as well. It may be some time before a recovery is staged but at least for now the index is not moving lower.
WEDNESDAY, April 16th
The consumer price index rose 0.3% in March, matching market expectations. A 1.9% increase in energy prices led the gain last month. Food price increases remained moderate. Over the past year consumer inflation has grown at a 4.0% rate. Excluding food and energy prices the core CPI was up 0.2% on the month and 2.4% on the year. Consumer inflation has eased slightly from the beginning of the year, giving the Fed leeway to adjust monetary policy as necessary.
The MBA mortgage applications index climbed 2.5% to 743.4% for the week ending April 11. All of the gain was a result of a 5.2% increase in refinance applications. Purchase applications declined 0.8% on the week. Refinancing activity is currently being supported by low rates but resurgence in purchase activity will need borrowers to meet higher loan standards and higher lender confidence.
Construction starts for new homes tumbled 11.9% in March to an annualized pace of 947,000. This was the first drop below a million units (at an annual rate) since 1991. Housing starts are down 36.5% over the past year. An outsized 24.6% decline in multifamily starts led the decline last month.
The Fed’s beige book survey indicated that the economy continued to weaken in March and early April. Labor markets, consumer spending, transportation and residential and commercial construction activity have all softened appreciably. Tourism, energy, agriculture and health services were positive contributors to growth. Loan demand decreased under tighter credit standards. Input cost increases were widespread but pass-through of these costs was limited. This report supports another rate cut, either 25 or 50 basis points as the Fed works to lessen the depth of a recession rather than contain the eruption of inflation.
THURSDAY, April 17th
The index of leading economic indicators rose 0.1% in March following five consecutive monthly declines. Weakness emanated from higher layoffs, lower stock prices, weak residential construction and building permits. Strength in the manufacturing components and money supply provided the offset. One monthly gain does not indicate full economic recovery however it can be taken to mean that the downturn may be less severe. The level of the index indicates slow and possibly contracting economic growth over the next six to nine months.
Jobless claims rose 17k to 372k for the week ending April 12. Claims remain elevated, illustrating softer labor market conditions and continued job losses. Expect the employment report for April to show another decline in payrolls.
FRIDAY, April 18th
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12849.36 12325.42 +523.94 or +4.25%
NASDAQ 2402.97 2290.24 +112.73 or +4.92%
WEEK IN ADVANCE
With few signs of housing’s recovery evident, new and existing home sales will be of the most interest in the coming week. Along with data flows the Fed will be watching the financial markets before making their move at the end of the month.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
MONDAY, April 14th
MONDAY, April 14th
Retail sales gained 0.2% in March, driven by sales at gas stations, sporting goods stores, restaurants and bars. Weakness was concentrated in home-related product stores such as furniture, building materials and garden supplies. Even with the gain last month, longer term spending trends remain very weak as consumers cope with job losses, falling home values, high energy prices and tighter credit.
TUESDAY, April 15th
The producer price index jumped 1.1% in March, nearly twice consensus estimates, as food and energy prices surged during the month. Excluding food and energy prices, the core PPI rose 0.2% last month as expected. Over the past year the PPI surged 6.9% as core wholesale prices increased 2.8%, near a cyclical high. Looking ahead, inflationary pressures should recede under weak economic conditions.
The NAHB housing market index was unchanged at a level of 20 in April, the same as in March and February. The composition of the index components changed, though, with lower ratings for present single-family home sales while sales six months from now was tracking higher. Foot traffic through model homes increased as well. It may be some time before a recovery is staged but at least for now the index is not moving lower.
WEDNESDAY, April 16th
The consumer price index rose 0.3% in March, matching market expectations. A 1.9% increase in energy prices led the gain last month. Food price increases remained moderate. Over the past year consumer inflation has grown at a 4.0% rate. Excluding food and energy prices the core CPI was up 0.2% on the month and 2.4% on the year. Consumer inflation has eased slightly from the beginning of the year, giving the Fed leeway to adjust monetary policy as necessary.
The MBA mortgage applications index climbed 2.5% to 743.4% for the week ending April 11. All of the gain was a result of a 5.2% increase in refinance applications. Purchase applications declined 0.8% on the week. Refinancing activity is currently being supported by low rates but resurgence in purchase activity will need borrowers to meet higher loan standards and higher lender confidence.
Construction starts for new homes tumbled 11.9% in March to an annualized pace of 947,000. This was the first drop below a million units (at an annual rate) since 1991. Housing starts are down 36.5% over the past year. An outsized 24.6% decline in multifamily starts led the decline last month.
The Fed’s beige book survey indicated that the economy continued to weaken in March and early April. Labor markets, consumer spending, transportation and residential and commercial construction activity have all softened appreciably. Tourism, energy, agriculture and health services were positive contributors to growth. Loan demand decreased under tighter credit standards. Input cost increases were widespread but pass-through of these costs was limited. This report supports another rate cut, either 25 or 50 basis points as the Fed works to lessen the depth of a recession rather than contain the eruption of inflation.
THURSDAY, April 17th
The index of leading economic indicators rose 0.1% in March following five consecutive monthly declines. Weakness emanated from higher layoffs, lower stock prices, weak residential construction and building permits. Strength in the manufacturing components and money supply provided the offset. One monthly gain does not indicate full economic recovery however it can be taken to mean that the downturn may be less severe. The level of the index indicates slow and possibly contracting economic growth over the next six to nine months.
Jobless claims rose 17k to 372k for the week ending April 12. Claims remain elevated, illustrating softer labor market conditions and continued job losses. Expect the employment report for April to show another decline in payrolls.
FRIDAY, April 18th
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12849.36 12325.42 +523.94 or +4.25%
NASDAQ 2402.97 2290.24 +112.73 or +4.92%
WEEK IN ADVANCE
With few signs of housing’s recovery evident, new and existing home sales will be of the most interest in the coming week. Along with data flows the Fed will be watching the financial markets before making their move at the end of the month.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Monday, April 14, 2008
Economic Highlights for the Week Ending April 11, 2008
MONDAY, April 7th
Consumer credit rose by $5.16 billion to $2.54 trillion in February, according to Federal Reserve data released today. Consumer credit in January was upwardly revised to $10.29 billion from $6.9 billion in the original estimate. February credit growth was led by gains in the revolving credit category as consumers used credit cards to fund consumption. Consumer credit will be worth watching as a spending gauge as consumers contend with slumping housing markets, high energy prices and slow job growth.
TUESDAY, April 8th
The pending home sales index fell to 84.6% in February from a level of 86.2% in January. The index, which tracks contracts signed, was down 1.9% on the month and off 21.4% over the last year. The slight decline in the index in February suggests that there will be little change in the pace of existing home sales over the next few months. The chief economist at NAR said it could be summertime before sales start to improve and later in the year before any sustainable increases.
Deciding on monetary policy was difficult for the FOMC on March 18 due to uncertainties in the economic outlook, financial market stress and somewhat elevated inflation. Committee members were unsure if monetary policy alone would be enough to address contracting growth, house price declines, soft labor markets and financial market turmoil related to credit losses. The vote was 8-2 in favor of a 75 basis point rate cut with members agreeing that more time would be needed to assess the effects of monetary policy easing to date.
WEDNESDAY, April 9th
The MBA mortgage applications index increased 5.4% to 725.6% for the week ending April 4. The purchase index was up 8.1% on the week but remains 7.0% lower than a year ago. The refinance index gained 3.4% on a weekly basis and is 35.2% higher from one year ago. Rates were little changed, remaining quite low in the last week which continued to support application activity.
Easing expectations for a larger rate cut this month have climbed back up as many sources, including the IMF, Bloomberg and several Fed officials continue to forecast very weak economic growth for the U.S. this year. Fed funds futures traders were pricing in a 40% chance the Fed will lower rates by 50 basis points to 1.75% when they meet at the end of the month. Odds were running at about 12% for a half point rate cut just one week ago. It is still widely expected for the Fed to cut at least a quarter point at the next policy meeting.
THURSDAY, April 10th
The international trade deficit widened to $62.3 billion in February from a shortfall of $59.0 billion in January. Imports increased more than exports in February, accounting for the larger deficit. Export growth continues to be supported by the weak dollar. Surprisingly, import gains were driven by non-petroleum goods as petroleum imports actually declined. The larger trade deficit will detract from Q1 GDP.
Jobless claims plunged 53k to 357k for the week ending April 5. Even with the decline, the 4-week moving average was up 3k to 376k, the highest level since the aftermath of Hurricane Katrina. Claims levels remain elevated indicating an upward trend in layoffs combined with a moderate pace of hiring. Labor market conditions remain weak.
Chain store sales fell 0.5% in March, hurt by an early Easter, cold weather and weak economic conditions. An early Easter holiday will shift some sales into April, however, weak economic fundamentals will continue to weigh on consumer spending going forward with tax rebate checks perhaps providing some relief starting in May.
FRIDAY, April 11th
The import price index jumped 2.8% in March pushing the year-over-year gain to 14.8%. The oversized gain reflects the rebound in crude oil prices last month though non-petroleum prices posted a record high increase as well. Imported petroleum prices surged by 9.1% in March and have climbed 60% over the past year. Consumer and producer prices for March, due out next week, will likely show large gains related to higher energy prices.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12325.42 12609.42 -284.00 or -2.25%
NASDAQ 2290.24 2370.98 -80.74 or -3.40%
WEEK IN ADVANCE
A boatload of economic data in the coming week should help solidify the interest rate outlook. Key indicators include retail sales, housing starts, and consumer and producer prices. Also, the Fed’s beige book could provide some insight on their next policy decision.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Consumer credit rose by $5.16 billion to $2.54 trillion in February, according to Federal Reserve data released today. Consumer credit in January was upwardly revised to $10.29 billion from $6.9 billion in the original estimate. February credit growth was led by gains in the revolving credit category as consumers used credit cards to fund consumption. Consumer credit will be worth watching as a spending gauge as consumers contend with slumping housing markets, high energy prices and slow job growth.
TUESDAY, April 8th
The pending home sales index fell to 84.6% in February from a level of 86.2% in January. The index, which tracks contracts signed, was down 1.9% on the month and off 21.4% over the last year. The slight decline in the index in February suggests that there will be little change in the pace of existing home sales over the next few months. The chief economist at NAR said it could be summertime before sales start to improve and later in the year before any sustainable increases.
Deciding on monetary policy was difficult for the FOMC on March 18 due to uncertainties in the economic outlook, financial market stress and somewhat elevated inflation. Committee members were unsure if monetary policy alone would be enough to address contracting growth, house price declines, soft labor markets and financial market turmoil related to credit losses. The vote was 8-2 in favor of a 75 basis point rate cut with members agreeing that more time would be needed to assess the effects of monetary policy easing to date.
WEDNESDAY, April 9th
The MBA mortgage applications index increased 5.4% to 725.6% for the week ending April 4. The purchase index was up 8.1% on the week but remains 7.0% lower than a year ago. The refinance index gained 3.4% on a weekly basis and is 35.2% higher from one year ago. Rates were little changed, remaining quite low in the last week which continued to support application activity.
Easing expectations for a larger rate cut this month have climbed back up as many sources, including the IMF, Bloomberg and several Fed officials continue to forecast very weak economic growth for the U.S. this year. Fed funds futures traders were pricing in a 40% chance the Fed will lower rates by 50 basis points to 1.75% when they meet at the end of the month. Odds were running at about 12% for a half point rate cut just one week ago. It is still widely expected for the Fed to cut at least a quarter point at the next policy meeting.
THURSDAY, April 10th
The international trade deficit widened to $62.3 billion in February from a shortfall of $59.0 billion in January. Imports increased more than exports in February, accounting for the larger deficit. Export growth continues to be supported by the weak dollar. Surprisingly, import gains were driven by non-petroleum goods as petroleum imports actually declined. The larger trade deficit will detract from Q1 GDP.
Jobless claims plunged 53k to 357k for the week ending April 5. Even with the decline, the 4-week moving average was up 3k to 376k, the highest level since the aftermath of Hurricane Katrina. Claims levels remain elevated indicating an upward trend in layoffs combined with a moderate pace of hiring. Labor market conditions remain weak.
Chain store sales fell 0.5% in March, hurt by an early Easter, cold weather and weak economic conditions. An early Easter holiday will shift some sales into April, however, weak economic fundamentals will continue to weigh on consumer spending going forward with tax rebate checks perhaps providing some relief starting in May.
FRIDAY, April 11th
The import price index jumped 2.8% in March pushing the year-over-year gain to 14.8%. The oversized gain reflects the rebound in crude oil prices last month though non-petroleum prices posted a record high increase as well. Imported petroleum prices surged by 9.1% in March and have climbed 60% over the past year. Consumer and producer prices for March, due out next week, will likely show large gains related to higher energy prices.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12325.42 12609.42 -284.00 or -2.25%
NASDAQ 2290.24 2370.98 -80.74 or -3.40%
WEEK IN ADVANCE
A boatload of economic data in the coming week should help solidify the interest rate outlook. Key indicators include retail sales, housing starts, and consumer and producer prices. Also, the Fed’s beige book could provide some insight on their next policy decision.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Saturday, April 05, 2008
Economic Highlights for the Week Ending April 4, 2008
MONDAY, March 31st
With some relief in terms of inflationary pressure and continued signs of pervasive weakness, financial markets fully expect the FOMC to continue trimming rates in the near future. Fed funds futures traders are fully pricing in a quarter-point rate cut to 2.0% at the conclusion of the Fed’s two-day meeting, April 29-30. Traders ascribe a 75% chance the rate cut will be a half point.
TUESDAY, April 1st
The ISM manufacturing index rose to 48.6% in March from a reading of 48.3% in February. These data bested expectations for a small decline. However, this is the third reading below the key 50% level in the last four months indicating contraction national manufacturing conditions. Despite the contraction input prices remain stubbornly high. With business investment softening and consumer confidence faltering, demand is expected to be subdued with corresponding weak manufacturing production in the months ahead.
Construction spending fell 0.3% in February as January’s decline was revised to be much smaller. Construction spending has fallen for five straight months due to weakness in the residential sector where expenditures dropped 0.9% in February, the 24th consecutive monthly decline, and remain 18.8% lower over the past year.
WEDNESDAY, April 2nd
Motor vehicle sales fell 1.7% in March to an annualized pace of 15.1 million units. This was the slowest sales pace since October 2005. Auto sales were higher while truck sales dropped because of gas mileage considerations. Vehicle sales are likely to remain weak as house price declines, sluggish job growth, tighter credit and higher gas prices curtail consumer spending, especially for big-ticket items.
The MBA mortgage applications index plunged 28.7% to 688.3% for the week ending March 28. This reversed a substantial portion of last week’s 48.1% surge. Nevertheless, total mortgage application volumes are still 6.0% above their year ago level. The purchase index fell 11.8% on the week and is down a similar 11.6% from one year ago. Refinance applications dropped 38.1% from the previous week but remain 25.6% above their year ago level. Refinance applications accounted for 53.4% of total loan applications, down from 62.0% a week earlier.
Fed Chief Ben Bernanke forecasted flat to slightly contracting growth the first half of this year with the possibility of some improvement sometime in the second half of the year in comments made to the Congressional Joint Economic Committee today. The Chairman also said that monetary and fiscal stimulus that has already taken place should be enough to support modest growth later this year suggesting the Fed may be nearing an end to their rate cutting campaign.
THURSDAY, April 3rd
The ISM non-manufacturing index increased slightly in March to 49.6% from 49.3% in February. This was the third consecutive sub-50% reading indicating mild contraction in service sector activity. Details in the data suggest moderate weakening may continue in the near term, which is consistent with the broader economic outlook.
Jobless claims jumped 38k to 407k for the week ending March 29. The surge in unemployment filings was unexpected, and raises the level of claims to the highest in 2 years since the aftermath of Hurricane Katrina. Jobless claims have been trending higher over the last year and a half indicating increased layoffs and subdued hiring amid weakened labor market conditions.
The economic readings of late while still showing weakness have not been as weak as economists have forecast. Rates drifted slightly higher this week related to better than expected data results. 30-year fixed rate mortgages averaged 5.88% this week compared to 5.85% last week according to Freddie Mac’s mortgage market survey. Economists at Freddie Mac point out though, that recession worries are keeping a lid on any large upward swings in rates right now and that rates remain at historically low levels.
FRIDAY, April 4th
Employers continued to shed jobs in March providing further confirmation of a mild recession currently taking place. Payroll employment shrank by 80,000 last month, more than expected and the biggest decline since March 2003. Moreover, the previous two months were downwardly revised to show a net loss of 67,000 more jobs. The unemployment rate jumped to 5.1% of the work force from 4.8% in February. The third consecutive month of substantial payroll declines will place pressure on Fed to continue cutting rates, perhaps more aggressively than their current outlook would warrant.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12609.42 12216.40 +393.02 or +3.22%
NASDAQ 2370.98 2261.18 +109.80 or +4.85%
WEEK IN ADVANCE
Data in the coming week, which is light and mostly second-tier, takes a back seat to scheduled Fed speeches and the FOMC meeting minutes from March 18 in terms of the interest rate outlook. Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
With some relief in terms of inflationary pressure and continued signs of pervasive weakness, financial markets fully expect the FOMC to continue trimming rates in the near future. Fed funds futures traders are fully pricing in a quarter-point rate cut to 2.0% at the conclusion of the Fed’s two-day meeting, April 29-30. Traders ascribe a 75% chance the rate cut will be a half point.
TUESDAY, April 1st
The ISM manufacturing index rose to 48.6% in March from a reading of 48.3% in February. These data bested expectations for a small decline. However, this is the third reading below the key 50% level in the last four months indicating contraction national manufacturing conditions. Despite the contraction input prices remain stubbornly high. With business investment softening and consumer confidence faltering, demand is expected to be subdued with corresponding weak manufacturing production in the months ahead.
Construction spending fell 0.3% in February as January’s decline was revised to be much smaller. Construction spending has fallen for five straight months due to weakness in the residential sector where expenditures dropped 0.9% in February, the 24th consecutive monthly decline, and remain 18.8% lower over the past year.
WEDNESDAY, April 2nd
Motor vehicle sales fell 1.7% in March to an annualized pace of 15.1 million units. This was the slowest sales pace since October 2005. Auto sales were higher while truck sales dropped because of gas mileage considerations. Vehicle sales are likely to remain weak as house price declines, sluggish job growth, tighter credit and higher gas prices curtail consumer spending, especially for big-ticket items.
The MBA mortgage applications index plunged 28.7% to 688.3% for the week ending March 28. This reversed a substantial portion of last week’s 48.1% surge. Nevertheless, total mortgage application volumes are still 6.0% above their year ago level. The purchase index fell 11.8% on the week and is down a similar 11.6% from one year ago. Refinance applications dropped 38.1% from the previous week but remain 25.6% above their year ago level. Refinance applications accounted for 53.4% of total loan applications, down from 62.0% a week earlier.
Fed Chief Ben Bernanke forecasted flat to slightly contracting growth the first half of this year with the possibility of some improvement sometime in the second half of the year in comments made to the Congressional Joint Economic Committee today. The Chairman also said that monetary and fiscal stimulus that has already taken place should be enough to support modest growth later this year suggesting the Fed may be nearing an end to their rate cutting campaign.
THURSDAY, April 3rd
The ISM non-manufacturing index increased slightly in March to 49.6% from 49.3% in February. This was the third consecutive sub-50% reading indicating mild contraction in service sector activity. Details in the data suggest moderate weakening may continue in the near term, which is consistent with the broader economic outlook.
Jobless claims jumped 38k to 407k for the week ending March 29. The surge in unemployment filings was unexpected, and raises the level of claims to the highest in 2 years since the aftermath of Hurricane Katrina. Jobless claims have been trending higher over the last year and a half indicating increased layoffs and subdued hiring amid weakened labor market conditions.
The economic readings of late while still showing weakness have not been as weak as economists have forecast. Rates drifted slightly higher this week related to better than expected data results. 30-year fixed rate mortgages averaged 5.88% this week compared to 5.85% last week according to Freddie Mac’s mortgage market survey. Economists at Freddie Mac point out though, that recession worries are keeping a lid on any large upward swings in rates right now and that rates remain at historically low levels.
FRIDAY, April 4th
Employers continued to shed jobs in March providing further confirmation of a mild recession currently taking place. Payroll employment shrank by 80,000 last month, more than expected and the biggest decline since March 2003. Moreover, the previous two months were downwardly revised to show a net loss of 67,000 more jobs. The unemployment rate jumped to 5.1% of the work force from 4.8% in February. The third consecutive month of substantial payroll declines will place pressure on Fed to continue cutting rates, perhaps more aggressively than their current outlook would warrant.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12609.42 12216.40 +393.02 or +3.22%
NASDAQ 2370.98 2261.18 +109.80 or +4.85%
WEEK IN ADVANCE
Data in the coming week, which is light and mostly second-tier, takes a back seat to scheduled Fed speeches and the FOMC meeting minutes from March 18 in terms of the interest rate outlook. Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
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