Market Update for the Week of May 14, 2018

Info That Hits Us Where We Live

Americans’ confidence in the housing market reached an all-time high in April’s Fannie Mae Home Purchase Sentiment Index. The share of Americans who say now is a good time to sell also hit a record high, so more listings should come to market.

Rates have moved little, which Freddie Mac‘s chief economist put to “a tight labor market, solid economic growth and restrained inflation.” He added, “the demand for purchase credit remains rock solid, which should set us up for another robust summer home sales season.”

But even as rates increase, First American‘s chief economist observes, we are still “well below the historical average of about 8% for a 30-year, fixed-rate mortgage–and house-buying power remains strong.”

Business Tip of the Week

Time block your week. For example, three days a week, block two hours for client meetings. Every day, block 11-11:30 for emails, 2-2:30 for social media. Use the rest of your time for the rest of your work.

Review of Last Week

BULL RUN… After a three-week absence, the bulls returned to Wall Street, pushing the three major indexes up to sizable gains for the week and into positive territory for the year. Investors simply couldn’t resist the pull of good data. 

Last week’s lower than expected CPI inflation calmed fears the Fed would get aggressive about rate hikes. Plus, bond prices stayed strong enough to hold yields below 3%, which also keeps rates down.

Corporate earnings rose an average of nearly 25% in Q1, funding bonuses and wage gains for employees. Small wonder May’s preliminary Michigan Consumer Sentiment matched April’s level, remaining at a 14-year high.

The week ended with the Dow UP 2.3%, to 24831; the S&P also UP 2.4%, at 2728; but the Nasdaq UP 2.7%, to 7403.

Even with stocks up, bonds did OK, flat to down a bit. The 30YR FNMA 4.0% bond ended down .12, at $101.66. After dipping last week, the national average 30-year fixed mortgage rate remained unchanged in Freddie Mac’s latest Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

Did You Know?

The share of middle-income households plunged from 57% in 1970 to a 43% average over the previous seven years, but it’s finally heading back up, at a 45% share today.

This Week’s Forecast

BUILDERS BUILD, RETAILERS ROCK, PHILLY FACTORIES DOING FINE Home building activity should continue to rise, with April Housing Starts heading further above the 1.3 million mark. April Retail Sales are also predicted up, though slightly less than March. The Philadelphia Fed Index should show factory activity in that region down slightly in May, but still growing nicely.

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 May 14 – May 18

Date Time (ET) Release For Consensus Prior Impact
May 15
08:30 Retail Sales Apr 0.3% 0.6% HIGH
May 15
08:30 NY Empire Manufacturing Index May 15.0 15.8 Moderate
May 15
10:00 Business Inventories Mar 0.1% 0.6% Moderate
May 16
08:30 Housing Starts Apr 1.325M 1.319M Moderate
May 16
08:30 Building Permits Apr 1.350M 1.354M Moderate
May 16
09:15 Industrial Production Apr 0.6% 0.5% Moderate
May 16
09:15 Capacity Utilization Apr 78.4% 78.0% Moderate
May 16
10:30 Crude Inventories 05/12 NA -2.2M Moderate
May 17
08:30 Initial Unemployment Claims 05/12 216K 211K Moderate
May 17
08:30 Continuing Unemployment Claims 05/05 NA 1.790M Moderate
May 17
08:30 Philadelphia Fed Index May 20.0 23.2 HIGH
May 17
10:00 Leading Economic Index (LEI) Apr 0.4% 0.3% Moderate

Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The Fed futures market has baked in a 0.25% hike next month. That should hold through the summer, with another small increase in the fall. Note: In the lower chart, a 100% probability of change is a 0% certainty the rate will stay the same.

Current Fed Funds Rate: 1.50%-1.75%

After FOMC meeting on: Consensus
Jun 13 1.75%-2.00%
Aug   1 1.75%-2.00%
Sep 26 2.00%-2.25%


Probability of change from current policy:

After FOMC meeting on: Consensus
Jun 13        100%
Aug   1            6%
Sep 26          78%

Statistics source:

Material in this article from: Inside Lending Market Snapshot

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