Market Update for the Week of July 9, 2018

INFO THAT HITS US WHERE WE LIVE

Freddie Mac‘s chief economist says “mortgage rates may have a little more room to decline over the very short term.” And with “millennials reaching the peak age to buy their first home, the housing market should have some room to grow going forward.”

The Census Bureau‘s latest data shows strong gains in single-family construction, up 8.2% year-over-year, with multi-family projects up 4.2%. Good signs for a much-needed boost in supply.

The Minutes of the Fed’s June meeting reported on page 5: “Residential mortgage financing conditions remained accommodative for most borrowers. For borrowers with low credit scores, conditions stayed tight but continued to ease.”

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Review of Last Week

PLENTY OF FIREWORKS… The July 4th holiday shortened the trading week, but there was still time for lots of Wall Street fireworks. For a finale, the three major indexes ended the week solidly ahead, following earlier fireworks set off by a better-than-expected jobs report.

June saw 213,000 new nonfarm payrolls, with upward revisions to April and May sending the total to 250,000. The Unemployment Rate went back up to 4.0%, but that was from a growing labor participation rate, a good thing.

This calmed ongoing trade war concerns, especially after both ISM Manufacturing and ISM Services set off their own fireworks, hitting levels indicating strong expansion. Plus, the trade deficit in May fell to a 19-month low. Boom!

The week ended with the Dow UP 1.0%, to 24456; the S&P 500 UP 1.5%, to 2760; and the Nasdaq UP 2.4%, to 7688.

For bonds, the abbreviated trading week ended with Treasuries broadly higher. The 30YR FNMA 4.0% bond ended UP .14, to $102.06. The national average 30-year fixed mortgage rate continued its recent retreat in Freddie Mac’s latest Primary Mortgage Market Survey, down now five of the last six weeks. 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 of prospective homebuyers revealed only 5% would call off their searches if rates hit 5%, while 24% said that increase would have no impact on their plans.

This Week’s Forecast

INFLATION SHOULD STAY IN A HEALTHY RANGE… The Fed believes that inflation in the 2% target range signals economic strength, as it’s also an indicator of wage growth. This week’s Consumer Price Index (CPI) and Core CPI reads are expected to put inflation in that territory.

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 Jul 9 – Jul 13

Date Time (ET) Release For Consensus Prior Impact
W
Jul 11
08:30 Producer Price Index (PPI) Jun 0.2% 0.5% Moderate
W
Jul 11
08:30 Core PPI Jun 0.2% 0.3% Moderate
W
Jul 11
10:30 Crude Inventories 07/07 NA +1.2M Moderate
Th
Jul 12
08:30 Initial Unemployment Claims 07/07 225K 231K Moderate
Th
Jul 12
08:30 Continuing Unemployment Claims 06/30 NA 1.739M Moderate
Th
Jul 12
08:30 Consumer Price Index (CPI) Jun 0.2% 0.2% HIGH
Th
Jul 12
08:30 Core CPI Jun 0.2% 0.2% HIGH
Th
Jul 12
14:00 Treasury Budget Jun NA -$90.2B Moderate
F
Jul 13
10:00 U. of Michigan Consumer Sentiment – Preliminary Jul 97.8 98.2 Moderate

Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months…The Fed Funds futures market is even more certain rates won’t be touched in August, will bump in September, but not in November. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.

Current Fed Funds Rate: 1.75%-2.00%

After FOMC meeting on: Consensus
Aug   1 1.75%-2.00%
Sep 26 2.00%-2.25%
Nov   8 2.00%-2.25%

 

Probability of change from current policy:

After FOMC meeting on: Consensus
Aug   1            2%
Sep 26          81%
Nov   8          23%

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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