Market Update for the Week of August 6, 2018


After dipping two months in a row, Pending Home Sales went up 0.9% in June–in all four U.S. regions. This National Association of Realtors (NAR) index of signed contracts on existing homes points to higher sales for July.

The NAR’s chief economist believes the worst of the supply crunch has possibly passed. And’s chief economist noted, “markets on both coasts and in the South reported inventory increases in July.”

The latest Case-Shiller Home Price Index stayed at a 6.4% annual gain for the second month in a row. So the rate at which home prices are rising seems to have stabilized for now.


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Review of Last Week

EARNINGS AND DATA SPIKE STOCKS… Hot on the heels of solid corporate earnings and decent economic data, the Dow and the S&P 500 scored their fifth weekly gain in a row, while the Nasdaq followed two weeks of losses with the biggest boost of the three.

July jobs was the key economic report, and although we got a less-than-expected 157,000 new Nonfarm Payrolls, upward revs to May and June yielded a net gain of 216,000. Unemployment ticked down to 3.9%, pretty impressive, since the labor force is up by 1.5 million the past year.

The Fed met and left rates alone, as predicted. Even better, their policy statement said recent economic activity is rising at a “strong” rate, upgraded from the “solid” rate they observed in June. ISM reads showed manufacturing and services sectors staying well into expansion territory.

The week ended with the Dow UP 0.1%, to 25463; the S&P 500 UP 0.8%, to 2840, and the Nasdaq UP 1.0%, to 7812.

Treasuries finished the week higher, helping mortgage bonds post modest gains. The 30YR FNMA 4.0% bond ended up .11, to $101.67. The national average 30-year fixed mortgage rate drifted up for the second week in a row according to 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.


In June, residential construction starts scored a 4% monthly gain, while ADP and Moody’s Analytics reported 7,000 new construction jobs. Looks like the construction sector is moving up.

This Week’s Forecast

PRICES GROW SLOWLY… Inflation is big on the radar this week and it’s expected to rise by the Consumer Price Index (CPI) and Core CPI (excluding volatile food and energy prices). But the rate of gain remains mild, even on the wholesale front, by the Producer Price Index (PPI) and Core PPI.

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 Aug 6 – Aug 10

Date Time (ET) Release For Consensus Prior Impact
Aug 8
10:30 Crude Inventories 08/04 NA +3.8M Moderate
Aug 9
08:30 Initial Unemployment Claims 08/04 220K 218K Moderate
Aug 9
08:30 Continuing Unemployment Claims 07/28 NA 1.724M Moderate
Aug 9
08:30 Producer Price Index (PPI) Jul 0.3% 0.3% Moderate
Aug 9
08:30 Core PPI Jul 0.2% 0.3% Moderate
Aug 10
08:30 Consumer Price Index (CPI) Jul 0.2% 0.1% HIGH
Aug 10
08:30 Core CPI Jul 0.2% 0.2% HIGH
Aug 10
14:00 Treasury Budget Jul NA -$42.9B Moderate


Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months…Wall Street’s betting the Fed will bump rates a quarter percent at the end of September, then leave them alone until we get another tick up at the end of the year. Note: In the lower chart, a 94% probability of change is only a 3% probability the rate will stay the same.

Current Fed Funds Rate: 1.75%-2.00%

After FOMC meeting on: Consensus
Sep 26 2.00%-2.25%
Nov   8 2.00%-2.25%
Dec  19 2.25%-2.50%


Probability of change from current policy:

After FOMC meeting on: Consensus
Sep 26          94%
Nov   8            9%
Dec  19          73%

Statistics source:

Material in this article from: Inside Lending Market Snapshot

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Jim Passi
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