Market Watch

By : Sharon Campbell

>> Market Update

QUOTE OF THE WEEK… “After all is said and done, more is said than done.” –Aesop, Greek story teller

INFO THAT HITS US WHERE WE LIVE… Plenty was being said last week aboutExisting Homes Sales, down 3.2% for October. The talk among some analysts was that the drop indicates a slowdown in the housing recovery. But October sales appear to have been somewhat affected by the government shutdown (remember that?), with closings delayed because the IRS couldn’t verify income. Even with that, October posted the fifth highest level for any month since late 2009, when the home buyer tax credit was about to go away. In fact, October sales came in at a 5.12 million annual rate, up 6% from a year ago.

The National Association of Realtors (NAR) feels a lack of inventory is holding down sales, However, the median existing home price is up 12.8% over a year ago, whichshould bring more sellers into the market. Rising prices also make buyers morewilling to commit than when they feared values could keep dropping. Plus, the National Association of Home Builders confidence index held at 54 in November, near its highest levels in eight years, which should boost the new home supply. For the week ending November 15, mortgage applications for purchase loans jumped 6%.

BUSINESS TIP OF THE WEEK…”Touch it once” is a time-tested time management strategy. Act on an item the moment you touch it, instead of going back to it again and again before actually completing it.

>> Review of Last Week

SWEET 16… In spite of all the talk about stock market bubbles, the Dow Jones Industrial Average closed above 16,000 for the first time ever. This Sweet 16 party was joined by the S&P 500 celebrating its record close above 1800, as it nailed its seventh straight weekly gain. Many investors maintain these increases are not a price bubble. They point to real value tied to better than expected Q3 corporate earnings, improvements in the major economies of the U.S., China, and Europe, and the understanding that although the Fed may taper its bond buying, it won’t raise interest rates any time soon.

Wall Street’s optimistic view of our economic future was supported by Retail Sales, UP 0.4% in October, as the consumer clearly wasn’t spooked by the federal government’s partial shutdown. Business Inventories, UP at a faster-than-predicted 0.6% rate, showed companies seemed as confident as their customers. Yes, Existing Home Sales dipped in October and the Philly Fed showed manufacturing in that region grew less than forecast. But CPI inflation stayed under control and weekly Unemployment Claims saw their largest drop in nearly three months!

The week ended with the Dow up 0.6%, to 16065; the S&P 500 up 0.4%, to 1805; and the Nasdaq up 0.1%, to 3992.

Bonds were pressured after minutes from the October 30 meeting hinted the Fed could begin tapering its bond buying soon. The FNMA 3.5% bond we watch ended the week down .10, to $101.06. National average fixed mortgage rates fell in Freddie Mac’s Primary Mortgage Market Survey for the week ending November 21. This was attributed to low overall inflation rates and weaker manufacturing growth.Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.

DID YOU KNOW?… The NAR reported the median time on market for all homes soldin October was 54 days — and 36% were on the market less than a month! The median time for all homes sold in October 2012 was 71 days.

>> This Week’s Forecast

HOME BUILDING AND PENDING SALES UP, CONSUMERS KEEP SMILING… There’s a lot to learn in just three days. We get a two-month view of home building, as October’sHousing Starts and Building Permits come in with September’s, unreported during the government shutdown. Economists expect gains for these, as well as for OctoberPending Home Sales. Consumer Confidence and Michigan Consumer Sentiment are forecast up in November.

The stock and bond markets are closed on Thanksgiving and close early on Black Friday. Happy Thanksgiving to you and yours!

>> The Week’s Economic Indicator Calendar

Weaker 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 Nov 25 – Nov 29

 Date Time (ET) Release For Consensus Prior Impact
M
Nov 25
10:00 Pending Home Sales Oct 1.3% –5.6% Moderate
Tu
Nov 26
08:30 Housing Starts Sep 915K 891K Moderate
Tu
Nov 26
08:30 Housing Starts Oct 920K NA Moderate
Tu
Nov 26
08:30 Building Permits Sep 932K 918K Moderate
Tu
Nov 26
08:30 Building Permits Oct 932K NA Moderate
Tu
Nov 26
10:00 Consumer Confidence Nov 72.4 71.2 Moderate
W
Nov 27
08:30 Initial Unemployment Claims 11/23 330K 323K Moderate
W
Nov 27
08:30 Continuing Unemployment Claims 11/16 2.875M 2.876M Moderate
W
Nov 27
08:30 Durable Goods Orders Oct –2.2% 3.8% Moderate
W
Nov 27
09:45 Chicago PMI Nov 58.0 65.9 HIGH
W
Nov 27
09:55 Univ. of Michigan Consumer Sentiment–Final Nov 73.0 72.0 Moderate
W
Nov 27
10:00 Leading Economic Indicators (LEI) Index Oct –0.1% 0.7% Moderate
W
Nov 27
10:30 Crude Inventories 11/23 NA 0.375M Moderate

 

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The debate continues about when the Fed will start to taper its bond buying program, but economists agree that the Funds Rate will stay down where it is well into next year. 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 18 0%–0.25%
Jan 29 0%–0.25%
Mar 19 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Dec 18      <1%
Jan 29      <1%
Mar 19      <1%