January 29, 2016
U.S. economic growth declined in the fourth quarter of 2015 as businesses ramped up efforts to reduce inventory, while the stronger dollar and weak global demand weighed on exports. The Bureau of Economic Analysis reported that Gross Domestic Product (GDP) fell to 0.7% in the final three months of 2015 from 2.0% in the third quarter. For all of 2015, GDP rose 2.4%, which is below what is considered a healthy economy.
In unexpected news, the Bank of Japan (BOJ) moved to negative interest rates overnight, in an effort to kick start its struggling economy. They cited the high price of oil as one headwind weighing on their economy. The BOJ also said that it would push rates even lower if needed. The move means that savers will be charged for the banks to hold their money. Negative rates also encourage banks to lend more and consumers to spend more than they save.
The extreme Stock market volatility in January caused consumers to be a bit less rosy regarding current economic conditions than what was originally reported earlier in the month. Consumer Sentiment fell to 92.0 late in the month, down from 93.3 in the initial reading. In addition, consumers feel that the job market has reached its peak and that consumers may remain frugal on spending.
January 28, 2016
The U.S. Federal Reserve kept interest rates on hold at yesterday’s Federal Open Market Committee meeting. The Monetary Policy Statement revealed that U.S. economic growth somewhat slowed in the last three months of 2015, while the labor market remained strong. On the inflation front, the Fed’s target rate of 2% has not yet been achieved, but will most likely hit that target, despite headwinds from lower oil prices and the stronger dollar. The Fed’s benchmark Fed Funds Rate remained at 0.50%. The National Association of REALTORS® (NAR) reported on Thursday that Pending Home Sales in December edged higher due to a big increase in the Northeast, which offset declines in other regions of the country. Sales were up a meager 0.1% from November, and are up 4.2% from December 2014. A spokesperson for the NAR said that “warmer than average weather and more favorable inventory conditions compared to other parts of the country encouraged more households in the Northeast to make the decision to buy last month.” Popular social networking service Facebook reported blowout corporate earnings on Wednesday afternoon, smashing Wall Street estimates on both total revenues and earnings. The roll out of its mobile app in the past year has seen more than 90% of monthly and daily users on mobile, the company said. It was the first quarter in the company’s history that earnings topped the $1 billion mark on $5.84 billion in revenues. For 2015, total revenues were up 44% from 2014 to $17.83 billion. Total users for Facebook hit 1.59 billion.
January 27, 2016
The Commerce Department reported on Wednesday that December New Home Sales surged 10.8% from November to an annual rate of 544,000 units, above the 506,000 expected. It was third consecutive monthly gain and the third best annual gain since 2008. Sales rose 14.5% in 2015 to 501,000 due to increased confidence in potential home buyers, a strengthening labor market along with low mortgage rates. New Home Sales are based upon the following definition: “A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit.” The house can be in any stage of construction: not yet started, under construction, or already completed.
Shares of Apple Inc. are falling in today’s trading after a sobering report on its iPhone sales. The popular smart-phone has seen sales grow at their slowest pace since the introduction to the iPhone in 2007. The company also stated that revenues in the current quarter are expected to decline for the first time in 13 years, signaling the stratospheric growth may be cooling. Apple went on to say that the strong dollar and slowing global growth are the reasons behind the decline in sales. In addition, China, its largest overseas market, has begun to show “signs of economic softness” in the past few months.
Mortgage application volume rose for the third straight week in the latest survey as mortgage rates continue to hover just above all-time low levels. The Mortgage Bankers Association reported that its Market Composite Index, a measure of total mortgage loan application volume, rose 8.8% from one week earlier. The refinance index gained 11%, while the purchase index increased 5%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) reached its lowest level since October 2015, dropping to 4.02%, from 4.06%. Also falling, the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 3.89% from 3.93%.
January 26, 2016
The housing markets begin the new year with positive news on home price appreciation. The S&P/Case Shiller 20-city Home Price Index rose 5.8% year-over-year due to continued low mortgage rates, tight supplies and an improving labor market. On a monthly basis, prices were up 0.9% from October, the fastest monthly gain since March. Within the report it said that 14 cities put up better gains in November than they did in October.
Despite the recent sell-off in the U.S. Stock markets, Americans confidence regarding the economy rose in January. The Conference Board reported that Consumer Confidence rose to 98.1 this month, above the 96.8 expected and above the December reading of 96.5. Lynn Franco, Director of Economic Indicators at The Conference Board said, “For now, consumers do not foresee the volatility in financial markets as having a negative impact on the economy.” The report went on to reveal that consumers’ outlook for the labor market was also slightly more optimistic.
The hot rental markets that occurred in 2015 may start to cool off a bit in 2016, reports online real estate listing service Zillow. However, Zillow did caution that rents will remain high in many of the major markets across the nation, especially on the West Coast. Nationally, Zillow expects rents to flatten, rising just 1.1% in 2016 after the 4.6% increase in 2015. “The slowdown in rental appreciation will provide some relief for renters who’ve been seeing their rents rise dramatically every single year for the past few years,” said Zillow Chief Economist Svenja Gudell. “However, the situation remains tough on the ground: rents are still rising, and renters are struggling to keep up.”
January 25, 2016
Black Knight Financial Services reported on Monday that home prices rose 0.1% in November from October and are up 5.5% on a year-over-year basis. Steady employment gains coupled with low mortgage rates continue to be the catalysts behind home price appreciation. Black Knight went on to say that at $253K, the national level Home Price Index is now just 5.3% off its June 2006 peak of $268K, and up 27% from the market’s bottom in January 2012. For the fifth month in a row, New York led the gains among states, registering a 1.2% increase from October to November.
Gas prices at the nations pumps continue to decline as oil prices hit 13-year lows. A big oversupply in oil reserves is the key mover in lower oil prices. Just recently, Iran announced record high oil production, which is weighing on an already saturated market. The national average price for a regular gallon of gasoline is at $1.82, down from $2 a month ago. The all-time high price for a regular gallon of gas was back in July of 2008 when the price hit $4.11.
McDonald’s, the world’s largest hamburger chain, reported better-than-expected earnings in its latest quarterly report driven in part by its recent addition of breakfast around-the-clock. The company reported that unseasonably warm weather along with the launch of all-day breakfast helped to boost sales by 5.7% in the last three months of 2015. For the last quarter of 2015, McDonald’s had earnings per share or $1.31 per share, which beat Wall Street expectations for $1.23 per share. Total revenue was $6.34 billion, also topping the $6.24 billion analysts were expecting.
January 22, 2016
The National Association of REALTORS® reported on Friday that December Existing Home Sales surged nearly 15% from November to an annual rate of 5.46 million units, above the 5.12 million expected. However, the big gains could be because of closing being put off until December due to TRID rules or “Know Before You Owe”. Sales were up 7.7% from a year ago. Existing Home Sales are completed transactions that include single-family homes, townhomes, condominiums and co-ops.
After the recent big losses racked up the U.S. Stock markets, prices rose yesterday and are rising today due in part to oil prices gushing higher. In addition, dovish comments from European Central Bank President Mario Draghi also helped to push prices higher. The closely watched S&P 500 Index has lost a little over 7% to start the year, its worst start to a year on record. To put things into perspective, at the height of the Great Recession in March of 2009, the S&P hit 666 and is now at 1,894.
A massive snowstorm is set to impact nearly 75 million people stretching from the Southeast all the way up to New York City. The storm, labeled Jonas, could dump up to 3 feet of snow in some areas with blizzard warnings throughout the Mid-Atlantic and Northeast states. Washington D.C. could see up to two feet of the white stuff, which has already prompted school closing and government shutdowns. Winds could reach up to 60 miles per hour with coastal storm surges and flooding set to occur.
January 21, 2016
Global economic woes pushed investors to the safe haven of the Bond markets to begin the new year and out of riskier assets, such as Stocks and commodities. When Bond prices rise, mortgage rates tend to push lower as they have an inverse relationship. Freddie Mac reports that the 30-year conventional fixed mortgage rate ($417,000 or less) fell to 3.81% this week from 3.92% with an average point of 0.6. The slowdown in China’s economy coupled with plunging oil prices are a few of the reasons for the rush into the safety of the Bond markets.
Americans filing for first-time unemployment benefits rose to a 7-month high in the latest survey, signaling layoffs have picked up from the record lows seen in 2015. The Labor Department reported that Weekly Initial Jobless Claims rose by 10,000 in the latest week to 293,000, which was above the 280,000 expected. However, any number below 300,000 is considered a strong labor market. Back in October, claims hit a post-recession low of 256,000. The numbers are quite volatile from Thanksgiving until Martin Luther King Jr. Day due to employers hiring and laying off for the holiday shopping season.
The manufacturing sector continues to contract, raising questions as to the strength of the U.S. economy. The strong dollar coupled with the steep decline in oil prices are seen as the headwinds for the sector. A stronger dollar has made U.S. exports more expensive for international markets, while the drop in oil prices have led energy companies to reduce spending on equipment, which has hurt the manufacturing industry. The Philadelphia Fed Manufacturing Index came in at -3.5 in January, just above the -4.0 expected. A reading above zero indicates expansion in the sector whereas a reading below zero points towards contraction.
January 20, 2016
After big gains in November, December Housing Starts declined 2.5% from the previous month, raising concerns about the health of the U.S. economy. The Commerce Department reported that Housing Starts came in at an annual pace of 1.149 million units, below the 1.197 million expected. This follows a recent spate of weak economic data. On the bright side, December was the ninth straight month that Housing Starts were above 1 million units, the longest stretch since 2007. For 2015, Housing Starts were up nearly 11%.
Inflation at the consumer level remained tame in December as energy prices continued to decline. The Consumer Price Index (CPI) fell 0.1% after being unchanged in November. The so-called Core CPI, which strips out volatile food and energy prices, rose 0.1%. In the 12 months ending in December, CPI increased 0.7%, the biggest increase in a year, while Core CPI was up 2.1%, the largest gain since July 2012.
The Mortgage Bankers Association reported on Wednesday that its Market Composite Index, a measure of total mortgage loan application volume, rose 9% in the latest week. With mortgage rates just above historical lows, would-be borrowers chose to refinance their homes. The refinance index jumped 19%, while the purchase index fell by 2%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.06%, from 4.12%. In addition, the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) fell to 3.93%, from 4.02%.
January 19, 2016
Fannie Mae reports that the housing recovery will march on as several factors affecting the ability of households to purchase a home continue to improve. Fannie expects that further labor market tightening will lead to a pickup in compensation and increased job security. In addition, a recent lenders survey shows that lenders expect to continue to ease lending standards and expand consumers’ access to mortgage credit this year.
The National Association of Home Builders reported on Monday that its Housing Market Index held steady at 60 in January after the 60 recorded in December. Any number over 50 indicates that more builders view conditions as good rather than poor. “January’s HMI reading is right in line with our forecast of modest growth for housing,” said NAHB Chief Economist David Crowe. “The economic outlook remains promising, as consumers regain confidence and home values increase, which will help the housing market move forward.”
Gas prices at the pumps continued to edge lower in the latest survey as oil prices decline due to a glut of oil flowing through global pipelines. The national average price for a regular gallon of gasoline is at $1.88, down from $2 a month ago. In addition to the large supply of oil, Iran has stated that they intend to boost production, which is weighing on prices. In Houghton Lake, Michigan, the price was seen at $0.47 cents due to pricing wars at local gas stations.
January 15, 2016
The Commerce Department reported on Friday that December sales at retailers fell in December to end the weakest year since 2009. Retail Sales fell 0.1% last month versus the +0.1% expected. For all of 2015, Retail Sales rose 2.1%, the smallest advance of the current economic expansion. Despite the extra cash provided by lower gas prices, Americans may have socked away those savings, instead of spending them on holiday shopping.
Wal-Mart, the world’s largest retailer, announced today that it will be closing 269 stores, with half of those in the U.S. due to increased competition. The other half of the closings will come from Brazil, which has been a challenge for the retailer. The closures will impact 16,000 workers, with 10,000 of those here in the States. The company did say that it would try to place those workers affected in other locations, but when that’s not possible it will provide laid-off workers with 60 days of pay.
U.S. Stocks are plunging once again today as the carnage in the Stock markets continues its blistering downward spiral for the start of 2016. Today alone, the Dow Jones Industrial Average and the S&P 500 are both down 2.8%, while the NASDAQ is down 3.8%. Those are big losses for a trading day. The sell-off comes on the heels of declining oil prices, slowing global economies along with the Chinese markets falling into bear market territory. A bear market is a condition in which prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining.