Market Update for the Week of June 11, 2018

Info That Hits Us Where We Live

According to Bloomberg, first-time buyers accounted for almost 50% of conventional purchase mortgages backed by Freddie Mac in the first quarter this year.

And the beat goes on: Ellie Mae’s latest Millennial Tracker reports that sector of the population bought new homes in record numbers during April.

Also in the first quarter of 2018, homeowners with mortgages watched their equity grow by 13.3%, or over $1 trillion, as tracked in the latest CoreLogic Home Equity Report.

Business Tip of the Week

Your attitude determines your altitude. Stay positive. Start the day with affirmations of all your strengths. In setbacks, look for opportunities. See problems as challenges you’ll ultimately overcome.

Review of Last Week

FOCUS ON THE FUNDAMENTALS… Despite tons of trade yak in the media, investors stuck to economic fundamentals and sent the Dow to its best gain since March and the S&P 500 and the Nasdaq up for the third straight week, the Nasdaq to a new record.

Those economic fundamentals have been quite positive: a very healthy labor market, record high consumer confidence and a continued increase in business investment.

Last week’s data showed accelerating growth in the services sector: the Purchasing Managers Services Index hit a three-year high. Economists now predict 3.3% GDP growth in Q2, boosted apparently by the tax cuts.

The week ended with the Dow UP 2.8%, to 25317; the S&P 500 UP 1.6%, to 2779; and the Nasdaq UP 1.2%, to 7646.

Bonds ended Friday flat to off a bit, taking a pause before Fed week. The 30YR FNMA 4.0% bond ended down .35, to $101.59. Freddie Mac’s latest Primary Mortgage Market Survey showed the national average 30-year fixed mortgage rate dipping two weeks in a row. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

Did You Know?

A recent survey reports 60% of respondents describe their dream home as a new build with a little more than 2,000 square feet; 46% say the family room is the space they’ll most likely use for entertaining.

This Week’s Forecast

INFLATION AND RETAIL SALES GROW, THE FED HIKES… Welcome to Fed week where things should head up, including Consumer Price Index (CPI) inflation and Retail Sales. With prices and the economy on the rise, the Fed may feel even more comfortable with their FOMC Rate Decision to hike, a move the market sees as certain as sunrise tomorrow.

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 11 – Jun 15

Date Time (ET) Release For Consensus Prior Impact
Tu
Jun 12
08:30 Consumer Price Index (CPI) May 0.3% 0.2% HIGH
Tu
Jun 12
08:30 Core CPI May 0.2% 0.1% HIGH
Tu
Jun 12
08:30 Treasury Budget May NA -$88.4B Moderate
W
Jun 13
08:30 Producer Price Index (PPI) May 0.3% 0.1% Moderate
W
Jun 13
08:30 Core PPI May 0.2% 0.2% Moderate
W
Jun 13
10:30 Crude Inventories 06/09 NA +2.1M Moderate
W
Jun 13
14:00 FOMC Rate Decision 06/13 1.75%-2.00% 1.50%-1.75% HIGH
Th
Jun 14
08:30 Initial Unemployment Claims 06/09 223K 222K Moderate
Th
Jun 14
08:30 Continuing Unemployment Claims 06/02 NA 1.741M Moderate
Th
Jun 14
08:30 Retail Sales May 0.4% 0.3% HIGH
Th
Jun 14
10:00 Business Inventories Apr 0.3% 0.0% Moderate
F
Jun 15
08:30 NY Empire Manufacturing Jun 20.0 20.1 Moderate
F
Jun 15
09:15 Industrial Production May 0.2% 0.7% Moderate
F
Jun 15
09:15 Capacity Utilization May 78.1% 78.0% Moderate
F
Jun 15
10:00 U. of Michigan Consumer Sentiment – preliminary Jun 99.0 98.0 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%

Forecasting Federal Reserve policy changes in coming months… It will be a surprise on Wednesday if the Fed doesn’t hike a quarter percent. But that rate should hold until September. 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           68%

Probability of change from current policy:

After FOMC meeting on: Consensus
Jun 13          91%
Aug   1          10%
Sep 26          69%

Statistics source: www.markettrends.com

Material in this article from: Inside Lending Market Snapshot

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Jim Passi
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Schaumburg, IL 60173
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