Senior Loan Officer
GA License# 26180
1000 Mansell Exchange W, Bldg. 200, Ste. 270
Alpharetta, GA 30022
|For the week of May 7, 2012 – Vol. 10, Issue 19|
>> Market Update QUOTE OF THE WEEK..."One person with a belief is equal to a force of 99 who have only interests." --John Stuart Mill, British philosopher and political economist
INFO THAT HITS US WHERE WE LIVE... Happily, it's becoming easier to believe the housing market is turning around, although in fits and starts. For example, the Q1 Advanced GDP report showed that home building increased for the period at a 19% annual rate, its fourth consecutive quarterly gain. In line with this, several home builders have recently reported higher sales and orders. The National Association of Realtors (NAR) projects new home sales UP 31.6% for 2012.
More evidence: as of March, Realtor.com put the median list price of homes up 5.56% for the year. The NAR's chief economist offered, "The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the country, which means home prices will be rising in more areas as the year progresses." The NAR forecasts existing home sales UP nearly 10% for 2012, to 4.68 million units.
BUSINESS TIP OF THE WEEK... Tech companies say it's better to ship a product sooner even if it has a few bugs. So when your new service or marketing effort is good enough to go, launch it!
>> Review of Last WeekA DOWNER... The broad S&P 500 stock index sank 2.4%, its worst weekly loss of the year and worst performance since mid-December. Friday the Nasdaq saw its worst one-day and weekly loss since late November. The culprit was the April jobs report, with just 115,000 nonfarm jobs added. But the two prior months were revised higher, so there was something for the bulls as well as the bears. The unemployment rate dropped to 8.1%, although, siding with the bears, many economists pointed out this was because more people gave up looking for work.
Other data also revealed a mixed picture. ISM Manufacturing surprised to the upside, but ISM Non-Manufacturing was lower than expected, although both were still just over the line showing growth. Personal spending in March was up at a slower clip than expected, but personal income came in stronger. Spending is up 4% and income is up 3.2% for the year. Core PCE Prices were up 0.2% for the month, so inflation remains within the Fed's target range.
For the week, the Dow ended down 1.4%, at 13038; the S&P 500 closed down 2.4%, to 1369; and the Nasdaq went down 3.7%, to 2956.
Unsurprisingly, Friday's worse than expected Employment Report set off a big flight to safety into bonds. The FNMA 3.5% bond we watch finished the week UP .77, at $104.01. National average mortgage rates continued to edge lower according to Freddie Mac's weekly Primary Mortgage Market Survey. Rates for some types of mortgages made new record lows.
DID YOU KNOW?... First quarter home sales closings were the highest for the period in five years. And the boost in first quarter contract signings indicates second quarter sales could be just as good.
>> This Week’s ForecastQUIET BUT INTERESTING... Not a lot of economic reports this week, but some items of interest. It's expected the Trade Deficit continued to grow in March, meaning we're still buying more from them than they are from us. We'll see if the Federal Budget beats its prior $40 billion+ deficit.
We also want to watch weekly Initial Unemployment Claims, which have been heading back up toward 400,000. Friday we'll have wholesale price inflation in the form of PPI and Core PPI (excludes food and energy). These numbers are expected to remain low, so the Fed can continue its super low rate policy.
>> 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 May 7 – May 11
| Date||Time (ET)||Release||For||Consensus||Prior||Impact|
|08:30||Initial Unemployment Claims||05/05||365K||365K||Moderate|
|08:30||Continuing Unemployment Claims||04/28||3.288M||3.276M||Moderate|
|14:00||Federal Budget ||Apr||NA||-$40.4B||Moderate|
|08:30||Producer Price Index (PPI)||Apr||0.0%||0.0%||Moderate|
|09:55||Univ. of Michigan Consumer Sentiment||May||76.2||76.4||Moderate|
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months... The Fed would have to start raising the Funds Rate if inflation started becoming a problem, but everything appears fine for now. 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 |
Probability of change from current policy:
|After FOMC meeting on:||Consensus |
|Jun 20|| <1%|
|Jul 31|| <1%|
|Sep 12|| <1%|
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