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Market Update

Market Update
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INFO THAT HITS US WHERE WE LIVE... Well, we can all finally enjoy some solid signs of recovery in the housing market. Tuesday we got the news Existing Home Sales were UP 3.4% in April to a 4.62 million unit annual rate. Sales are now UP 10.0% over a year ago. The median price is UP 10.1% from a year ago and the average price is UP 7.4% for the year.  

This great news was followed on Wednesday with new single-family homes sales UP 3.3% in April to a 343,000 unit annual rate and UP 9.9% over a year ago. The months' supply of new homes dropped to 5.1, although inventories rose a bit. The median price is now UP 4.9% versus a year ago and the average price is UP 5.1% for the year. No one expects a huge increase in sales right away, but as one economist put it, "The housing recovery is definitely underway."

BUSINESS TIP OF THE WEEK... When someone asks what you do, be ready with an exact 15-second reply. This "elevator pitch" should state the pain you solve and whom you solve it for.

>> Review of Last Week

WORRIED BUT WINNING... Worries about Europe obsessed Wall Street investors, yet there was enough positive sentiment to give stocks their first winning week in a month by the time everyone left for the long weekend. Fears that Greece would abandon the Euro were joined by news that the U.K. slipped back into recession where Germany may soon find itself after logging one quarter of negative growth. The week concluded with Spain about to do its biggest bank rescue in history. Phew!

The good vibes pivoted around the unexpectedly upbeat home sales for April and the revised University of Michigan Consumer Sentiment Survey. This surprised to the upside, hitting its highest reading in four years. Still, all was not rosy, as April Durable Goods Orders were up less than expected and when volatile transportation items are taken out, Durable Goods were down for the second month in a row. 

For the week, the Dow ended UP 0.7%, at 12455; the S&P 500 closed UP 1.7%, to 1318; and the Nasdaq ended UP 2.1%, to 2838. 

In spite of investors' eurozone worries, there was enough optimism about stocks to keep bond prices pretty much flat for the week. The FNMA 3.5% bond we watch finished the week down just .05, at $104.11. National average mortgage rates were little changed in Freddie Mac's weekly survey, holding near record low levels. Their chief economist noted this was "helping to drive home buyer affordability." 

DID YOU KNOW?... GDP (Gross Domestic Product) is the total market value of all goods and services produced, equal to all consumer, investment and government spending, plus exports, minus the value of imports.

>> This Week’s Forecast

APRIL PENDING HOME SALES AND JOBS TO SUPPORT THEM... Wednesday we'll see if the good news in housing will continue. Pending Home Sales for April will give us an idea of Existing Home Sales in the June time frame and they're forecast up a bit, though not quite as much as in March. 

We'll then see if this beginning of a housing comeback gets help from the May Employment Report. With Q2 GDP expected to show economic growth slipping under 2%, only 155,000 new payrolls are forecast for the month. Core PCE Prices, the Fed's key inflation reading, should stay within the central bank's guidelines.

Monday, in observance of Memorial Day, all U.S. financial markets are closed.

>> 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 May 28 – Jun 1

 Date Time (ET) Release For Consensus Prior Impact
Tu
May 29
10:00 Consumer Confidence May 69.0 69.2 Moderate
W
May 30
10:00 Pending Home Sales Apr 2.0% 4.1% Moderate
Th
May 31
08:30 Initial Unemployment Claims 05/26 365K 370K Moderate
Th
May 31
08:30 Continuing Unemployment Claims 05/19 3.250M 3.260M Moderate
Th
May 31
08:30 GDP-2nd Estimate Q1 1.9% 2.2% Moderate
Th
May 31
08:30 GDP Price Deflator-2nd Estimate Q1 1.5% 1.5% Moderate
Th
May 31
09:45 Chicago PMI May 57.5 56.2 HIGH
Th
May 31
11:00 Crude Inventories 5/26 NA 0.883M Moderate
F
Jun 1
08:30 Average Workweek May 34.5 34.5 HIGH
F
Jun 1
08:30 Hourly Earnings May 0.2% 0.0% HIGH
F
Jun 1
08:30 Nonfarm Payrolls May 155K 115K HIGH
F
Jun 1
08:30 Unemployment Rate May 8.1% 8.1% HIGH
F
Jun 1
08:30 Personal Income Apr 0.3% 0.4% Moderate
F
Jun 1
08:30 Personal Spending Apr 0.3% 0.3% HIGH
F
Jun 1
08:30 Core PCE Prices Apr 0.2% 0.2% HIGH
F
Jun 1
10:00 ISM Index May 54.0 54.8 HIGH

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... The Fed is committed to keeping rates super low well into next year and economists believe they'll succeed.Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on: Consensus
Jun 20 0%–0.25%
Jul 31 0%–0.25%
Sep 12 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Jun 20      <1%
Jul 31      <1%
Sep 12      <1%
 

 

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