>> Market Update QUOTE OF THE WEEK... "Facts are stubborn things." --Ronald Reagan, 40th President of the United States
INFO THAT HITS US WHERE WE LIVE... Last week, the Fed had to admit the stubborn fact that there are "further signs of improvement" in the housing sector, even while they acknowledged that the economy has "decelerated somewhat over the first half of this year." A major website for real estate information reported that the home-vacancy rate is falling in some of the U.S. cities that were hit hardest by the housing crisis, a sign the market is recovering. Their Chief Economist said, "The biggest vacancy declines are in markets where prices are rising."
Want more stubborn facts that paint a picture of housing market recovery? The May S&P/Case-Shiller home price index showed home prices UP for the third month in a row in the 20 largest metro areas they track. A spokesperson called the annual changes registered in most of the markets "the best we've seen in at least 18 months." One final fact. In June, data for existing-home sales, new-home sales and housing starts were all better than their year-ago levels.
BUSINESS TIP OF THE WEEK... Kick-start your new business effort by digging through old e-mails. Look for contacts you forgot you had and old press releases about businesses you're interested in. >> Review of Last WeekJOBS WORK FOR WALL STREET... A strange week for investors, who spent four days in a bad mood, then Friday had their best session in more than a month to see the Dow gain for the fourth week in a row. The good vibes came after July nonfarm payrolls beat expectations, coming in at 163,000, the best number in about five months, although far fewer jobs than experts say we need for a sustained recovery. Normally persnickety Wall Streeters chose to ignore the creep up to an 8.3% unemployment rate. Traders even felt good about the Eurozone, although the European Central Bank met Thursday and essentially did nothing.
Our central bank, the beleaguered Fed, also had a meeting and did nothing -- no adding to the money supply (quantitative easing) to try and kick up the economy. This disappointed most investors and some economists. Core PCE Prices came in well within Fed inflation guidelines and Personal Income was also up a tick. ISM Manufacturing was still showing contraction (below 50), yet the week ended with ISM Services reporting slow expansion in the non-manufacturing sector, which provides well over 80% of our jobs. That's a good thing.
For the week, the Dow ended UP 0.2%, to 13096; the S&P 500 was UP 0.4%, to 1391; and the Nasdaq was UP 0.3%, to 2968.
Bonds gained following the European Central Bank's inaction, then headed south Friday as investors returned to stocks, inspired by that jobs report. The FNMA 3.5% bond we watch ended the week up .03, at $105.26. After hitting record lows the prior week, national average mortgage rates were up slightly, but still well below rates of a year ago. The Mortgage Bankers Association reported refinancing applications at their highest level in more than three years, but purchase loan applications were off slightly.
DID YOU KNOW?... Continuing Unemployment Claims represents far less than the total unemployed, excluding workers who've exhausted their benefits or who weren't eligible in the first place. In 2008, only 36% of unemployed workers received benefits. >> This Week’s Forecast PRODUCTIVITY, EXPORTS, THE DEFICIT... Following last week's monthly jobs melodrama, we look forward to a calmer flow of economic data in the coming five days. Preliminary Q2 Productivity is predicted to be UP 1.5%. This of course means that people are working harder, which is no surprise to those of us who to have jobs.
The July Federal Deficit is expected to remain in sadly elevated territory, no surprise there either. The June Trade Balance should show we buy almost $50 billion more from other countries than they buy from us. >> 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 Aug 6 – Aug 10 Date | Time (ET) | Release | For | Consensus | Prior | Impact | W
Aug 8 | 08:30 | Productivity – Prelim. | Q2 | 1.5% | –0.9% | Moderate | W
Aug 8 | 10:30 | Crude Inventories | 08/04 | NA | –6.522M | Moderate | Th
Aug 9 | 08:30 | Initial Unemployment Claims | 08/04 | 375K | 365K | Moderate | Th
Aug 9 | 08:30 | Continuing Unemployment Claims | 07/28 | 3.290M | 3.272M | Moderate | Th
Aug 9 | 08:30 | Trade Balance | Jun | –$47.5B | –$48.7B | HIGH | F
Aug 10 | 14:00 | Federal Deficit | Jul | NA | –$129.4B | HIGH |
>> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... Last week the Fed maintained it does not expect to raise the Funds Rate until late 2014. Economists don't see anything coming to change that mindset. 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 | Sep 13 | 0%–0.25% | Oct 24 | 0%–0.25% | Dec 12 | 0%–0.25% |
Probability of change from current policy:
After FOMC meeting on: | Consensus | Sep 13 | <1% | Oct 24 | <1% | Dec 12 | <1% |
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