Market Update for the Week of June 4, 2018

Info That Hits Us Where We Live

After heading up in February and March, the Pending Home Sales index of contracts signed on existing homes dipped 1.3% in April. Economists expect a modest bump in closed sales in May.

For the year, the National Association of Realtors (NAR) predicts existing home sales will grow to 5.54 million, up from 5.51 million in 2017.

Freddie Mac sees total home sales up 3.3% in 2018, to 6.32 million. Their latest report puts this increase to a healthy economy and strong consumer confidence.

Business Tip of the Week

Technology is important, but never forget, success in business comes down to people. Have a genuine interest in your clients, solve their problems, nurture relationships.

Review of Last Week

JOBS JOLT GEOPOLITICS… Canada, Mexico and EU tariffs, Italian and Spanish politics and North Korean summit speculation shook investors, until a surprisingly strong jobs report jolted them back into sending stock prices up. Two of the three major indexes gained for the week.

The growing U.S. economy added a healthy 223,000 new jobs in May, sending unemployment to a 3.8% 18-year low. Plus, total earnings (average hourly wages + total hours worked) are now up 4.9% the past year.

The ISM Index reported factory activity on the rise, while Personal Income and Consumption (consumer spending) also increased. Core PCE Prices pegged inflation at 1.8% for the year, still under the Fed’s 2% target.

The week ended with the Dow down 0.5%, to 24635; the S&P UP 0.5%, to 2735; and the Nasdaq UP 1.6%, to 7554.

Bond prices escalated from geopolitical concerns but retreated on the jobs data. The 30YR FNMA 4.0% bond ended UP .03, to $101.94. The national average 30-year fixed mortgage rate fell 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 NAR reports that, thanks to VA (Veterans Affairs) loans, “56% of active-duty and 41% of veterans put no money down when buying a home, compared to 7% of non-military.”

This Week’s Forecast

SERVICES SECTOR GROWS, PRODUCTIVITY HOLDS This quiet week features ISM Services (reflecting the sector of the economy providing the vast majority of our jobs) expected to show even more growth. The Fed will be watching Q1 Productivity – Revised, forecast to stay near its initial read.

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 Jun 4 – Jun 8

Date Time (ET) Release For Consensus Prior Impact
Jun 5
10:00 ISM Services May 58.0 56.8 Moderate
Jun 6
08:30 Trade Balance Apr -$48.8B -$49.0B Moderate
Jun 6
08:30 Productivity – Revised Q1 0.6% 0.7% Moderate
Jun 6
08:30 Unit Labor Costs – Revised Q1 2.8% 2.7% Moderate
Jun 6
10:30 Crude Inventories 06/02 NA -4.2M Moderate
Jun 7
08:30 Initial Unemployment Claims 06/02 225K 221K Moderate
Jun 7
08:30 Continuing Unemployment Claims 05/26 NA 1.726M Moderate

Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… There is still pretty strong consensus the Fed will do a quarter percent June hike. The probability of another bump in the fall is smaller but growing.  Note: In the lower chart, a 91% probability of change is only a 9% probability 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          91%
Aug   1          10%
Sep 26          69%

Statistics source:

Material in this article from: Inside Lending Market Snapshot

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Jim Passi
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Palatine, IL 60067
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