Market Watch

QUOTE OF THE WEEK… “The unexamined life is not worth living.” –Socrates, classical Greek philosopher

INFO THAT HITS US WHERE WE LIVE… Following the Socratic teaching, let’s examine life in the housing market. A research firm serving the mortgage industry reported that national home prices are growing slowly but staying in line with inflation adjusted long-run averages. They say this shows prices have normalized and future growth rates will look like historical ones, up between 3% and 5% per year. The firm’s vp of research and analytics added, “Nationally, we don’t see evidence of a price bubble forming again. Double digit gains over the last year, while similar to rates of growth in the run-up to the bubble, are off a much lower price floor.” Good point.

Low inventory has been a challenge in some markets, so it was encouraging to see a national real estate site report inventory up in 22 of its 35 largest metros. The National Association of Realtors (NAR) put inventory up 7.6% year-over-year in January. All this is the result of higher home prices, yet more inventory should mean slower price increases. Finally, realtor.com revealed its number of for-sale listings was up 3.1% year-over-year in January. The site’s president commented, “this early rise in inventory is a welcome trend.” Basically, analysts expect less-frenzied conditions for buyers and higher sales volumes in the months ahead.

BUSINESS TIP OF THE WEEK… Know when to hire outside help so you can dedicate yourself to the tasks that have the most impact, the ones that really matter.
>> Review of Last Week

“RATIONAL OPTIMISM”… Friday, the S&P 500 closed at a new record level, the latest in a string of record closes for the broadly based index. In addition, the Dow closed up for the second week in a row, while the tech-heavy Nasdaq posted its fifth straight weekly gain. All this investor enthusiasm was put to “rational optimism” by one market observer, who was referring to Wall Street’s reaction to the better-than-expected Employment Report. 175,000 Nonfarm Payrolls were added in February, the biggest gain in three months, and Hourly Earnings moved up 0.4%.

The unemployment rate also ticked up, to 6.7%, because more people came into the labor force. However, more folks looking for work can be seen as a good thing, since it shows people feel more jobs are available. There were mixed messages from other parts of the economic picture, as the trade deficit crept up to $39.1 billion in January and ISM Services reported less-than-expected growth in that sector in February. Yet Personal Spending came in higher than forecast, showing the consumer continues to contribute and the ISM Manufacturing Index also bested growth estimates.

The week ended with the Dow up 0.8%, to 16453; the S&P 500 up 1.0%, to 1878; and the Nasdaq up 0.7%, to 4336.

Some of the money flowing into stocks of course came from investors unloading their bonds, sending those prices lower. The FNMA 3.5% bond we watch finished the week down .94, to $100.18. Freddie Mac’s Primary Mortgage Market Survey reported national average fixed mortgage rates fell during the week ending March 6. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. The Mortgage Bankers Association said purchase loan applications were up 9% for the week ending Feb 28.

DID YOU KNOW?… An average of 189,000 jobs a month have been added in the last year. At that rate, it will take until December 2018 to return to pre-recession employment levels, if you account for people entering the labor force as a result of population growth.
>> This Week’s Forecast

CONSUMERS CRAWL BACK, SENTIMENT HANGS IN… Consumers are expected to show evidence they’re staying in the game, as Retail Sales are predicted to slip back into positive territory for February. In line with this, University of Michigan Consumer Sentiment is forecast to remain at the decent level it’s been posting lately. It will be no surprise the Federal Budget will continue running a huge deficit, which doesn’t seem to bother too many in Washington.
>> 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 Mar 10 – Mar 14

Date
Time (ET)
Release
For
Consensus
Prior
Impact
W
Mar 12
10:30
Crude Inventories
3/8
NA
1.429M
Moderate
W
Mar 12
14:00
Federal Budget
Feb
NA
–$203.5B
Moderate
Th
Mar 13
08:30
Initial Unemployment Claims
3/8
329K
323K
Moderate
Th
Mar 13
08:30
Continuing Unemployment Claims
3/1
2.925M
2.907M
Moderate
Th
Mar 13
08:30
Retail Sales
Feb
0.2%
–0.4%
HIGH
Th
Mar 13
10:00
Business Inventories
Jan
0.3%
0.5%
Moderate
F
Mar 14
08:30
Producer Price Index (PPI)
Feb
0.2%
0.2%
Moderate
F
Mar 14
08:30
Core PPI
Feb
0.1%
0.2%
Moderate
F
Mar 14
09:55
U. of Michigan Consumer Sentiment
Mar
82.0
81.6
Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Many economists now feel the Fed Funds Rate will remain at its super low level 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
Mar 19
0%–0.25%
Apr 30
0%–0.25%
Jun 18
0%–0.25%

Probability of change from current policy:

After FOMC meeting on:
Consensus
Mar 19
<1%
Apr 30
<1%
Jun 18
<1%