MARKET UPDATE
February saw New Home Sales grow 4.9%, reaching a 667,000 annual rate. The median price was measurably down from a year ago, along with mortgage rates, so it’s no surprise that buyers are showing up.
Housing Starts didn’t do so well, down 8.7%, to a 1.162 million annual rate. Yet 195,000 homes were authorized but not started, close to the largest number since 2007, and homes under construction stayed near a post-recession high.
Pending Home Sales also dipped in February, but only by a modest 1%, and that followed a healthy January bump. But home price gains keep shrinking, and purchase mortgage apps rose 6% for the week.
REVIEW OF LAST WEEK
MAKING HISTORY… Investors sent stock prices north, to close out an historic quarter. The S&P 500 rose 13.1%, its best three-month gain in nearly ten years. The market is a leading indicator of the economy, so this is good news.
With final Q4 GDP at 2.2%, some talked economic slowdown, yet GDP grew 3.0% in 2018, the fastest calendar year growth since 2005, and weekly initial jobless claims dropped by 5,000.
Those who fret about trade were frustrated by signs of progress in the U.S.-China negotiations and a lower-than-expected January trade deficit. Plus, Personal Income was up, and PCE inflation stayed well under the Fed’s 2% target.
The week ended with the Dow UP 1.7%, to 25929; the S&P 500 UP 1.2%, to 2834; and the Nasdaq UP 1.1%, to 7729.
Bonds came under pressure, but many recovered. The 30YR FNMA 4.0% bond ended UP .02, to $102.83. In Freddie Mac’s Primary Mortgage Market Survey, the national average 30-year fixed mortgage rate took the biggest drop in over 10 years. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?
In January, the S&P Dow Jones Case-Shiller National Home Price Index rose 4.3%, two percentage points below its pace in January 2018.
THIS WEEK’S FORECAST
ALL GROW: RETAIL, MANUFACTURING, SERVICES, JOBS, WAGES… Expect all the key reports to show an expanding economy: Retail Sales, ISM Manufacturing, ISM Services, and March jobs, with Nonfarm Payrolls and Hourly Earnings forecast to deliver strong numbers.
NOTE: Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and higher loan rates.
FEDERAL RESERVE WATCH
Forecasting Federal Reserve policy changes in coming months… The Fed Funds Futures market sees rates holding through the summer. All the probabilities of change are for a downward move in rates. Note: In the lower chart, an 8% probability of change is a 92% probability the rate will stay the same.
Current Fed Funds Rate: 2.25%-2.50%
| AFTER FOMC MEETING ON: | CONSENSUS |
| May 1 | 2.25%-2.50% |
| Jun 19 | 2.25%-2.50% |
| Jul 31 | 2.25%-2.50% |
Probability of change from current policy:
| AFTER FOMC MEETING ON: | CONSENSUS |
| May 1 | 8% |
| Jun 19 | 17% |
| Jul 31 | 24% |
