>> Market Update
QUOTE OF THE WEEK..."It would be so nice if something made sense for a change."--"Alice in Wonderland," Lewis Carroll
INFO THAT HITS US WHERE WE LIVE...What didn't make sense last week was the way the media reported the latest housing data. Housing Starts were UP a strong 15% in September, hitting a 658,000 annual rate. But the media chose to emphasize that the gain was mostly from multi-family starts which shows a big trend toward renting. Actually, multi-family units also include condominiums, which do make sense for first time buyers who don't have to deal with selling. The media also skimmed over the data that single-family starts were UP almost 2% for the month and starts overall are UP over 10% versus a year ago.
Then, Existing Home Sales came in 3% lower for September. The media reports by and large neglected to mention that this slight monthly drop followed a big increase achieved in August. In addition, Existing Home Sales are UP 11.3% year-over-year in September, the third straight month this figure has risen by double digits! Inventory is also down 13% in the last year and sales seem to be stabilizing around a 4.6 to 5.0 million annual rate. Not bad at all.
BUSINESS TIP OF THE WEEK...Success takes commitment--and time. So it's super important to be both passionate and patient developing your business until you get it just right.
>> Review of Last Week
AN UP AND DOWN WEEK...Things were volatile last week on Wall Street with the proceedings even concluding in up-and-down fashion, the Dow and the S&P 500 up for the period, but the tech-heavy Nasdaq a bit down. As usual, the volatility was all Europe's fault, as a steady stream of news alternately stirred hopes and then fears that their debt problems would be solved. There will be an EU summit this weekend and another midweek, which could clear things up. Let's hope.
Over here, Q3 corporate earnings season got off to a nice start, with around 70% of the companies reporting beating estimates. One glaring exception was Apple, who missed as people waited for the new iPhone, and this dragged down the Nasdaq. PPI wholesale inflation was up sharply for the month, but the Core CPI consumer inflation the Fed follows came in lower than expected. Manufacturing continues to show no signs of recession, with the Philadelphia Fed manufacturing index and Industrial Production both UP nicely and factory capacity at its highest level since August 2008!
For the week, the Dow ended UP 1.4%, at 11809 and the S&P 500 was UP 1.1%, to 1238; but the Nasdaq slipped 1.1%, to 2637.
While most equities did well, bond prices didn't fare too badly either. The FNMA 3.5% bond we watch closed Friday at $100.31, up .08 for the week. National average mortgage rates held steady, remaining at last week's super low levels, according to Freddie Mac's weekly survey of conforming mortgage rates.
DID YOU KNOW?...Homes listed on a Friday are 18.8% more likely to be toured and 12% more likely to sell within 90 days than homes listed on other days. This is from a study of 1.2 million listings over 21 months in 16 markets nationwide.
>> This Week’s Forecast
NEW HOME SALES, PENDING HOME SALES, GDP AND THE CONSUMER MINDSET... Wednesday, New Home Sales for September, are expected to be up slightly to around a 300,000 annual rate. The next day gives us Pending Home Sales for August. This measure of signed contracts on Existing Homes can indicate actual sales a couple of months out and it's predicted to be down slightly from the prior month.
On the overall economy, we'll have the GDP Advanced reading for Q3, which ended September 30. The forecast is for an improvement, but with GDP still well below 3%, there isn't yet the strong growth needed for recovery. What consumers think of all this will be reflected in Consumer Confidence and the University of Michigan Consumer Sentiment index, which are expected to hold steady.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Oct 24 – Oct 28
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...Economists are still forecasting the Funds rate to remain at its super low level for some time. The Fed said it wants to keep the rate down through the summer of 2013. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%-0.25%
Probability of change from current policy:
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© 2011 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking, Insurance, Securities and Health Care Administration- lender lic no. 6127 and broker lic no. 0964MB; WA Dept. of Financial Institutions-consumer lender lic no. 520-CL-49075. PrimeLending, A PlainsCapital Company is an Equal Housing Opportunity Lender.
>> Market Update
QUOTE OF THE WEEK..."When you cease to dream you cease to live."--Malcolm S. Forbes
INFO THAT HITS US WHERE WE LIVE...One dream that, happily, doesn't seem to be going away is the one we Americans have of owning our own home. In fact, in spite of all the negative news we hear about housing, the percentage of Americans who own their home is still the second highest on record, according to the Census Bureau. Even better, new research reveals that up to two million people are planning to jump into the housing market in the next two years.
The study from a business-to-business media company confirmed that Americans place a high value on homeownership across demographic groups, across the country, even where there have been larger declines in home values. Given today's prices and super low mortgage rates, 72% of homeowners and 59% of renters polled said that right now is a "good" or "very good" time to buy! Another study found that 80% of homeowners plan to buy another home and most view homeownership as one of the best long-term investments.
BUSINESS TIP OF THE WEEK...Do not cut corners in anything you do in business. Make sure your client's experience with you is an absolute delight.
>> Review of Last Week
BEST WEEK IN AWHILE...Awhile is actually more than two years, as stocks hadn't had a weekly performance this strong since July 2009. The broadly based S&P 500 was up a surprising 6% and stocks have now advanced in seven of the past nine sessions, gaining more than 11%. What made investors so upbeat was evidence that Europe is getting serious about paying its debts. Eurozone officials made a commitment to develop a full plan to stabilize the financial situation and shore up capital at European banks. This is good news for U.S. banks who have loaned money to their friends across the pond.
There was good economic news over here as well. The trade deficit remained flat for the month. Initial jobless claims ticked down for the week and the four-week moving average is well below where it was this Spring. Same-store chain store sales are up 2.8% over a year ago by one survey and up 4.8% by another. We ended the week with September Retail Sales UP 1.1% overall and UP 0.6% excluding autos. These are the strongest monthly increases since Q1 and say to some economists, if not to the media: no recession!
For the week, the Dow ended UP 4.9%, at 11644; the S&P 500 was UP 6.0%, to 1225; and the Nasdaq was UP 7.6%, to 2668.
With investors rushing back into the riskier stock market, bond prices suffered. The FNMA 3.5% bond we track closed Friday at $100.23, down .94 for the week. Plunging bond prices edged up yields and interest rates. Yet national average mortgage rates were up only a bit from last week's record levels, and are still historically low.
DID YOU KNOW?...Currency in circulation is the total amount of paper currency, coins and demand deposits held by consumers and businesses. A decline in this number can make fewer loans available, because banks don't have as many demand deposits in their reserve.
>> This Week’s Forecast
BUILDING NEW HOMES, SELLING EXISTING ONES, CHECKING UP ON INFLATION... This week gets us back to a look at the housing market. September Housing Starts are expected to be up a tad, just shy of 600,000 new homes a year. But analysts are predicting a slight dip in Existing Home Sales for September, although that figure should still hover near 5 million per year.
With the Fed's easy money policies, we have to keep an eye on inflation. For businesses, prices are forecast up slightly for the month, as measured by the Producer Price Index (PPI). The Fed's big focus is always on the Core Consumer Price Index (Core CPI). This excludes volatile food and energy prices and is projected to be up a little, but well within the Fed's target range.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Oct 17 – Oct 21
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...Economists see no change in the Funds rate for the next few Fed meetings. The Fed's stated goal is to keep the rate down through the summer of 2013. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
Probability of change from current policy:
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© 2011 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking,
>> Market Update
QUOTE OF THE WEEK..."Waste of time is the most extravagant and costly of all expenses."--Anonymous
INFO THAT HITS US WHERE WE LIVE...The week before last, the Fed announced 'Operation Twist,' where they'll switch their short term bond holdings to longer term maturities. This strategy wasted no time benefitting mortgage rates. Last week, national average mortgage rates were the lowest since Freddie Mac's weekly survey began back in 1971. Some academic experts contend mortgage rates may have never been this low--even under a special loan program for war veterans in the mid-1940's. Potential borrowers should take note.
Those borrowers, however, aren't jumping into the fray in droves just yet. The Mortgage Bankers Association reported purchase applications were down 0.8% for the week and volume is still down from where it was a year ago. But, hopefully, the present super-low mortgage rates, supported by 'Operation Twist,' will get home sales and mortgage applications moving at a faster pace.
BUSINESS TIP OF THE WEEK...Do you talk too much? Instead of impressing others with your wit and insight, just say something that might interest them. You also come across as more confident when you don't try to dominate the conversation.
>> Review of Last Week
DOWN, UP, UP, UP, DOWN...That's the way stocks went for five days, but all three major indexes ended the week up nicely anyway. The negatives as usual came from across the pond, with a ratings downgrade of Italy and Spain spurring investors' fears of 'contagion.' In case you were wondering, this contagion refers to European governments' debt problems spreading to major European banks whose difficulties could then cause losses at major U.S. banks...unless the European Union steps in.
For positives, the September Employment Report showed 103,000 new jobs, with upward revisions to July and August bringing the total to 202,000. But we've averaged only 72,000 jobs a month for the last six months, which isn't enough to bring down the 9.1% unemployment rate. The services sector, providing about 85% of our jobs, still expands, with the ISM Services index on an upward, if slow, trajectory for 22 months. Even truck and rail volumes are up, two more signs of economic growth and no recession.
For the week, the Dow ended UP 1.7%, at 11103; the S&P 500 was UP 2.1%, to 1155; and the Nasdaq was UP 2.6%, to 2479.
It was a wild week for Treasuries as the Fed began 'Operation Twist' by selling over $8 billion worth of short-term maturities. Better-than-expected economic news ultimately sent prices south. The FNMA 3.5% bond we track closed Friday at $101.17, down 1.08 for the week. As reported above, national average mortgage rates hit record low levels that some think may be the lowest of all time.
DID YOU KNOW?...The Paper House in Rockport, Massachusetts, is made entirely of newspaper (215 thicknesses!). Even the furniture is made of newspaper, including a desk with reports of Lindbergh's historic flight.
>> This Week’s Forecast
FED MINUTES, RETAIL SALES, CONSUMER HEADSET...The bond market is closed Monday for Columbus Day. Tuesday, we'll see the FOMC Minutes from the Fed's September 21 meeting, which launched 'Operation Twist.' This initiative to buy longer term bonds should help keep mortgage interest rates low for a while longer.
We'll also see what kind of effort the consumer is making to help the recovery. Retail Sales are forecast up for September, while Michigan Consumer Sentiment is also expected to be on the rise.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Oct 10 – Oct 14
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...The Fed has said it wants to keep the Funds rate down through the summer of 2013. So it's no surprise that economists see no change for the next few meetings. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
Probability of change from current policy:
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© 2011 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking, Insurance, Securities and Health Care Administration- lender lic no. 6127 and broker lic no. 0964MB; WA Dept. of Financial Institutions-consumer lender lic no. 520-CL-49075. PrimeLending, A PlainsCapital Company is an Equal Housing Opportunity Lender.
