>> Market Update QUOTE OF THE WEEK... "Sometimes life hits you in the head with a brick. Don't lose faith." --Steve Jobs, American businessman, designer and inventor
INFO THAT HITS US WHERE WE LIVE... Last week's housing reports weren't quite the head shot Apple's co-founder referred to, but they still required us to keep the faith. June New Home Sales were down 8.4%, coming in at a 350,000 annual rate. But the trend of a gradual recovery is still there, with new home sales UP 15.1% versus a year ago. The new home median price is down 3.2% versus a year ago, yet the average price is UP 0.3% and the inventory of completed new homes is at the lowest level on record, a 4.9 month supply.
Thursday we got the news that Pending Home Sales for June dipped 1.4%, but the number was still UP 9.5% from a year ago, making 14 months in a row of year-over-year gains. This measure of existing homes under contract could foretell a small glitch in sales a few months out. The FHFA index of prices for homes financed with conforming mortgages gained 0.8% in May and is 3.7% ahead of a year ago. This home price index is up at a 13.3% annual rate the last three months, its fastest three-month pace in twenty years!
BUSINESS TIP OF THE WEEK... Capitalize on your downtime. While waiting for a meeting or standing in a checkout line, Tweet, work on a new marketing idea or think of some new prospects to target. >> Review of Last WeekEUROPEANS SEND DOW UP OVER 13,000... Last Wednesday, European Central Bank President Mario Draghi said the ECB would do "whatever it takes to preserve the euro." The next day he revealed he's considering bond buying, a rate cut and a new LTRO (Long-Term Refinancing Operation) to shore up banks holding sovereign debt as collateral. With the Eurozone financial system getting this kind of support, investors celebrated by going on a buying spree in the equity markets. The Dow shot back up over 13,000, while the S&P 500 and the Nasdaq also scored healthy gains.
Health was not the economic theme, as the first estimate of Q2 GDP growth came in at a tepid 1.5% rate, down from Q1's 1.9% rate. This had observers wondering if the Fed would step in this week with a new round of quantitative easing -- an attempt to stimulate the economy with an injection of money. Most think the Fed will wait until after Friday's jobs report. Help of some kind is clearly needed, as 60% of the firms reporting Q2 earnings missed top line expectations. In other words, sales are down for lots of folks. The housing market seems to have stabilized, but a slowing economy won't help.
For the week, the Dow ended UP 2.0%, to 13076; the S&P 500 was also UP 1.7%, to 1386; and the Nasdaq climbed 1.1%, to 2958.
All the good news from Europe was bad news for bonds. Treasuries ended the week under pressure as investors moved back into riskier stocks. The FNMA 3.5% bond we watch ended the week down .82, at $105.23. Freddie Mac's weekly survey reported another dip in average U.S. mortgage rates. Some economists expect mortgage demand to be stronger in this continuing ultra-low rate environment.
DID YOU KNOW?... Treasuries, or T-Bills, are negotiable debt obligations issued and backed by the full faith and credit of the U.S. government. They have a maturity of a year or less and are exempt from state and local taxes. >> This Week’s Forecast WATCHING THE FED, LOOKING FOR JOBS... Plenty of economic points to ponder this week, but they all pale next to the Fed's FOMC Rate Decision and Friday's July Employment Report. No one sees the rate rising, but some think the central bank may announce more quantitative easing. Job creation is expected to remain weak, with the unemployment rate holding at its unacceptably high level.
In other items of interest, Personal Income is forecast up a bit and Core PCE Prices under control. ISM Manufacturing should show contraction overall, since the sector has slowed, although the Chicago PMI is expected to expand slightly. >> 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 Jul 30 – Aug 3 Date | Time (ET) | Release | For | Consensus | Prior | Impact | Tu
Jul 31 | 08:30 | Personal Income | Jun | 0.4% | 0.2% | Moderate | Tu
Jul 31 | 08:30 | Personal Spending | Jun | 0.1% | 0.0% | HIGH | Tu
Jul 31 | 08:30 | PCE Prices - Core | Jun | 0.1% | 0.1% | HIGH | Tu
Jul 31 | 08:30 | Employment Cost Index | Q2 | 0.5% | 0.4% | HIGH | Tu
Jul 31 | 09:45 | Chicago PMI | Jul | 52.5 | 52.9 | HIGH | Tu
Jul 31 | 10:00 | Consumer Confidence | Jul | 61.0 | 62.0 | Moderate | W
Aug 1 | 10:00 | ISM Manufacturing | Jul | 49.9 | 49.7 | HIGH | W
Aug 1 | 10:30 | Crude Inventories | 07/28 | NA | 2.717M | Moderate | W
Aug 1 | 14:15 | FOMC Rate Decision | 08/01 | 0%-0.25% | 0%-0.25% | HIGH | Th
Aug 2 | 08:30 | Initial Unemployment Claims | 07/28 | 365K | 353K | Moderate | Th
Aug 2 | 08:30 | Continuing Unemployment Claims | 07/21 | 3.298M | 3.287M | Moderate | F
Aug 3 | 08:30 | Average Workweek | Jul | 34.5 | 34.5 | HIGH | F
Aug 3 | 08:30 | Hourly Earnings | Jul | 0.2% | 0.3% | HIGH | F
Aug 3 | 08:30 | Nonfarm Payrolls | Jul | 100K | 80K | HIGH | F
Aug 3 | 08:30 | Unemployment Rate | Jul | 8.2% | 8.2% | HIGH | F
Aug 3 | 10:00 | ISM Services | Jul | 52.2 | 52.1 | Moderate |
>> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... The Fed has stated it does not want to raise the Funds Rate until well into the future. 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 | Aug 1 | 0%–0.25% | Sep 13 | 0%–0.25% | Oct 24 | 0%–0.25% |
Probability of change from current policy:
After FOMC meeting on: | Consensus | Aug 1 | <1% | Sep 13 | <1% | Oct 24 | <1% |
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