>> Market Update INFO THAT HITS US WHERE WE LIVE Last week was short, but still managed to squeeze in two reports on our favorite topic. Wednesday's New Home Sales for October were down 8.1% from the month before, at an annual rate of 283,000. A slight upward move in these numbers had been forecast. The inventory of new homes edged up to 8.6 months, higher than the 6 month's supply level everyone would like to see.
But Tuesday, October Existing Home Sales came in with a way smaller decline – down just 2.2% from September and in line with expectations. The National Association of Realtors (NAR) reported the annual sales rate at 4.43 million homes. Actual sales, year to date, are 4.15 million, down 2.9% from the same period a year ago. The NAR's chief economist feels that sales activity appears to be "off the bottom and attempting to settle into normal, sustainable levels." He expects steady improvement to levels "above 5 million by spring of next year." The median existing home price edged down a little to $170,500 and is down only 0.9% from a year ago. The months' supply of existing homes dipped to 10.5 from September's 10.6 reading, as inventories declined overall. >> Review of Last WeekA TURKEY FOR WALL STREET... Unfortunately, Thanksgiving week turned out to be a turkey for stock market investors. Stock prices went down following renewed concerns over European debt and North and South Korea lobbing shells at each other across their border. Even though one trading day registered a 150-point gain thanks to some encouraging economic news, three out of the four days were downers, so the Dow and the S&P 500 ended lower for the week, while the Nasdaq eked out a miniscule gain.
With European debt, there are once again fears of contagion, which negatively affected stock markets there and around the world. While Ireland works its bailout with the European Union and the International Monetary Fund, worries about Portugal and Spain re-surface. On the home front, a negative Durable Goods Orders reading for October was offset by an upwardly revised 5.0% gain for September. The fall-off in New Home Sales was similarly balanced by Existing Home Sales coming in as expected, covered above.
Encouraging indicators also included Q3 GDP (gross domestic product) getting an upward revision from its initial estimate, to a 2.5% annual growth rate. Improvements in consumer spending and exports drove the solid move up. Initial jobless claims held at under 450,000 for the third week in a row, now down to 407,000. Finally, University of Michigan Consumer Sentiment surged to 71.6, more than two points above consensus expectations.
For the week, the Dow was down 1.0%, to 11092.00; the S&P 500 was down 0.9%, to 1189.40; but the Nasdaq was UP 0.7%, to 2534.56.
The bond market benefited from the flight to safety caused by events in Europe and Korea, but there was enough good economic news to put bond prices under pressure. The FNMA 30-year 4.0% bond we watch ended down 8 basis points for the week, closing at $101.09. National average rates for fixed-rate mortgages barely moved last week, according to Freddie Mac's survey of conforming mortgage rates. They are still at historically low levels. >> This Week’s ForecastMORE JOBS, SAME UNEMPLOYMENT RATE... The month ends tomorrow, so Friday brings the
November Employment Report and everyone will be looking for signs of hope on the jobs front. Experts predict we'll have another monthly gain in payrolls, although the 130,000 jobs predicted won't be enough to move the unemployment rate down. A jobs recovery is key to the housing recovery, but we're not quite there.
Thursday's Pending Home Sales report for October will give us an idea about existing home sales a couple of months out. No one expects a surge just yet. Manufacturing, however, is forecast to continue its steady expansion, with both Chicago PMI and the ISM Index well north of 50. The ISM Services read also shows growth in the nonmanufacturing sector. Observers are expecting a slight hike in November Consumer Confidence, always a good thing. >> The Week’s Economic Indicator CalendarWeaker 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 November 29 – December 3 Date | Time (ET) | Release | For | Consensus | Prior | Impact | Tu
Nov 30 | 09:45 | Chicago PMI | Nov | 59.8 | 60.6 | HIGH | Tu
Nov 30 | 10:00 | Consumer Confidence | Nov | 52.0 | 50.2 | Moderate | W
Dec 1 | 08:30 | Productivity – Rev. | Q3 | 2.4% | 1.9% | Moderate | W
Dec 1 | 10:00 | ISM Index | Nov | 56.4 | 56.9 | HIGH | W
Dec 1 | 10:30 | Crude Inventories | 11/27 | NA | 1.03M | Moderate | Th
Dec 2 | 08:30 | Initial Unemployment Claims | 11/27 | 423K | 407K | Moderate | Th
Dec 2 | 08:30 | Continuing Unemployment Claims | 11/20 | 4.200M | 4.182M | Moderate | Th
Dec 2 | 10:00 | Pending Home Sales | Oct | 0.0% | –1.8% | Moderate | F
Dec 3 | 08:30 | Average Workweek | Nov | 34.3 | 34.3 | HIGH | F
Dec 3 | 08:30 | Hourly Earnings | Nov | 0.1% | 0.2% | HIGH | F
Dec 3 | 08:30 | Nonfarm Payrolls | Nov | 130K | 151K | HIGH | F
Dec 3 | 08:30 | Unemployment Rate | Nov | 9.6% | 9.6% | HIGH | F
Dec 3 | 10:00 | ISM Services Index | Nov | 54.5 | 54.3 | Moderate |
>> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months Economists expect the Fed Funds Rate to remain low while the Fed continues its $600 billion bond buying program through the first half of next year. A surge in inflation or in the economic recovery could of course change that. 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 | Dec 14 | 0%–0.25% | Jan 26 | 0%–0.25% | Mar 15 | 0%–0.25% |
Probability of change from current policy:
After FOMC meeting on: | Consensus | Dec 14 | <1% | Jan 26 | <1% | Mar 15 | <1% |
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