News for Prescott AZ - AmericanTowns.com

Thursday, October 29, 2009

Time to Read Between the Lines

 

 

 

Last Week in Review

 

 

"THE DEVIL IS IN THE DETAILS..." Or so the famous saying goes. And when it comes to really understanding the various reports and events unfolding in the economy, it's important to take a look at the details - not just the headlines. Here's what you need to know.

On the inflation front, the Producer Price Index, which measures wholesale inflation, unexpectedly fell due to a drop in energy prices. While that seems like good news on the surface, keep in mind that next month's number could climb higher again, as oil and natural gas have both been on a tear higher lately.

In housing news, Housing Starts and Building Permits both came in a bit below expectations, but this may be a sign that builders are exercising some caution - particularly in the face of the $8,000 tax credit for first time homebuyers that is presently set to expire on November 30th. Existing Home Sales came in better than expected - and a whopping 45% of those homes were sold to first time homebuyers - rushing to move in on that credit. Recent studies have shown that many who qualify for this tax credit aren't even aware of it...so please let me know if you or someone you know needs more information - the clock is ticking!

Additionally, the level of existing homes inventory shrunk to a 7.8 month supply, down from a recent high of 10.1 months in April.

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Chart: Existing Home Sales (Supply in Months)

In other news, 3rd quarter earnings season continues, where companies report their status as of the end of September. While many companies are beating expectations, it's important to realize that many of those companies achieved better earnings by cost cutting and layoffs, not from increased sales. This is a big disconnect between Wall Street and "Main Street". Stocks are rocketing higher based on these "positive" reports, but the cost cutting and job cutting measures can only go so far...you can't simultaneously grow the ranks of unemployment - and then grow your business, hoping for increased sales to those same people who are without jobs.

Last week's Jobless Claims numbers seem to confirm this as Initial Jobless Claims rose more than expected. In addition, the number of individuals continuing to receive unemployment benefits fell to the lowest level since March, but this is likely the result of people's unemployment benefits expiring, without them having been able to find jobs.

Also worth noting is the news that ratings agency Moody's lead analyst, Steven Hess, said that the US needs to cut its deficit or it could lose its "AAA" rating in the next 3 to 4 years, which we have maintained since 1917! Think of all we've been through - two World Wars, the Depression, three Wall Street collapses and major terrorist attacks...yet our credit quality has maintained that AAA rating, allowing us to issue debt at the most favorable rates. Hess went on to say that if the US doesn't "get the deficit down in the next 3-4 years to a sustainable level, then the rating will be in jeopardy." And just like on a mortgage when the credit rating gets reduced, interest rates move higher. This will definitely be something we'll keep an eye on in the months ahead.

After all the week's action, Bonds and home loan rates ended the week slightly worse than where they began.

AS THE PRESIDENT HAS DECLARED H1N1 - "SWINE FLU" - TO BE A NATIONAL EMERGENCY - GETTING THE FACTS IS MORE IMPORTANT THAN EVER. DO YOU KNOW HOW TO TELL WHAT'S JUST A COLD...AND WHAT IS ACTUALLY SWINE FLU? READ THIS WEEK'S MORTGAGE MARKET VIEW - AND PASS ON THE DETAILS TO YOUR FRIENDS AND COWORKERS.

 

Forecast for the Week

 

 

Another record sized round of Treasury auctions are on tap this week - and the massive amounts of supply that continue to flood the market can cause home loan rates to move higher, if there is ultimately not enough demand to sop up all the supply. Additionally, there are several economic reports which could be market movers. Tuesday brings both the Consumer Confidence and Durable Goods Reports, the latter of which gives us an update on consumer and business consumption and buying behavior via data on items that are non-disposable, such as cars, furniture, appliances, games, cameras, business equipment, etc.

On Wednesday, there will be more news on the housing front with the New Home Sales Report, while Thursday brings another Initial Jobless Claims Report. Thursday also brings a read on the economy with the Gross Domestic Product (GDP) Report, which is the broadest measure of economic activity. And the week could end with a bang, as Friday brings the Fed's favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index, found within the Personal Income Report.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Bonds held their ground for most of the week but ultimately were unable to remain above a key technical support level. I'll be watching closely to see what happens in the week ahead - and as always, reach out to me if you or others in your network need more information or questions answered...I'm here to help.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Oct 23, 2009)

Japanese Candlestick Chart

 

The Mortgage Market View...

 

 

H1N1: Information is the Best Defense!

Despite predictions from researchers at Purdue University that the H1N1 outbreak will peak this week, the reality is that it won't be going away any time soon. Let's not forget that the news is filled with shortages of the vaccine, as the number of H1N1 cases continues to surge across the country. And federal officials have warned that a second, larger outbreak could occur in early January.

The reality is that the best way to stop the spread of H1N1 is to know the symptoms and to take steps to protect yourself-and others-from it. The following information can help.

What are the symptoms of H1N1... and how are they different from the common cold?

Symptom

Cold

H1N1 Flu

Fever

Fever is rare with a cold.

Fever is usually present with the flu in up to 80% of all flu cases. A temperature of 100°F or higher for 3 to 4 days is associated with the flu.

Coughing

A hacking, productive (mucus- producing) cough is often present with a cold.

A non-productive (non-mucus producing) cough is usually present with the flu (sometimes referred to as dry cough).

Aches

Slight body aches and pains can be part of a cold.

Severe aches and pains are common with the flu.

Stuffy Nose

Stuffy nose is commonly present with a cold and typically resolves spontaneously within a week.

Stuffy nose is not commonly present with the flu.

Chills

Chills are uncommon with a cold.

60% of people who have the flu experience chills.

Tiredness

Tiredness is fairly mild with a cold.

Tiredness is moderate to severe with the flu.

Sneezing

Sneezing is commonly present with a cold.

Sneezing is not common with the flu.

Sudden Symptoms

Cold symptoms tend to develop over a few days.

The flu has a rapid onset within 3-6 hours. The flu hits hard and includes sudden symptoms like high fever, aches and pains.

Headache

A headache is fairly uncommon with a cold.

A headache is very common with the flu, present in 80% of flu cases.

Sore Throat

Sore throat is commonly present with a cold.

Sore throat is not commonly present with the flu.

Chest Discomfort

Chest discomfort is mild to moderate with a cold.

Chest discomfort is often severe with the flu.

If you think you have the H1N1 flu, you should take a few common-sense steps to protect your friends, family members, and coworkers. For instance, if you feel sick, stay home until you feel better and have gone at least 24 hours without relying on medicine to break your fever.

In addition, wash your hands, linens, dishes, and so on thoroughly. And cover your mouth and nose with a tissue when you cough or sneeze--and then throw the tissue away immediately. Finally, if you have to share a small space with other people, consider wearing a facemask to help make sure you don't spread the flu to the people around you.

Follow these steps and monitor your symptoms to help stop the spread of H1N1...and remain happy and healthy!

 

The Week's Economic Indicator Calendar

 

 

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of October 26 - October 30

Date

ET

Economic Report

For

Estimate

Actual

Prior

Impact

Tue. October 27

10:00

Consumer Confidence

Oct

54.0

 

53.1

Moderate

Wed. October 28

08:30

Durable Goods Orders

Sept

0.7%

 

-2.4%

Moderate

Wed. October 28

10:00

New Home Sales

Sept

440K

 

429K

Moderate

Wed. October 28

10:30

Crude Inventories

10/23

NA

 

1.31M

Moderate

Thu. October 29

08:30

Jobless Claims (Initial)

10/24

525K

 

531K

Moderate

Thu. October 29

08:30

Gross Domestic Product (GDP)

Q3

3.1%

 

-0.7%

Moderate

Thu. October 29

08:30

GDP Chain Deflator

Q3

1.3%

 

0.0%

HIGH

Fri. October 30

10:00

Consumer Sentiment Index (UoM)

Oct

70.0

 

69.4

Moderate

Fri. October 30

09:45

Chicago PMI

Oct

48.5

 

46.1

HIGH

Fri. October 30

08:30

Personal Consumption Expenditures and Core PCE

YOY

NA

 

1.3%

HIGH

Fri. October 30

08:30

Personal Consumption Expenditures and Core PCE

Sept

0.2%

 

0.1%

HIGH

Fri. October 30

08:30

Personal Spending

Sept

-0.4%

 

1.3%

Moderate

Fri. October 30

08:30

Personal Income

Sept

0.0%

 

0.2%

Moderate

Fri. October 30

10:00

Employment Cost Index (ECI)

Q3

0.5%

 

0.4%

HIGH

 

 

Equal Housing Lender          

 

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