July 28, 2016
Americans filing for first-time unemployment benefits remained near 43-year lows, though claims did rise in the latest week. Weekly Initial Jobless Claims rose 16,000 to 266,000, above the 260,000 expected. Claims have now remained below 300,000, a threshold associated with a healthy labor market, for 73 straight weeks, the longest stretch since 1973. The four-week moving average of claims, which irons out week-to-week volatility, fell 1,000 to 256,500 last week. A labor department spokesman said there were no special factors influencing last week’s claims data.
Freddie Mac reported that mortgage rates edged higher for the third week in a row to 3.48% for the 30-year fixed conventional rate ($417,000 or less) with 0.5 in points and fees. Mortgage rates continue to hover just above all-time lows giving would be buyers the confidence to lock in a low rate. The Federal Reserve Bank said yesterday it will continue to keep interest rates low for some time to support further improvement in the labor market and a return to 2% inflation.
Gas prices across the nation continued to decline this week as the price of oil pushes lower. The national average price for a regular gallon of gasoline fell to $2.14 on Thursday and has declined 24 cents in the past 47 days. The decline is due in part to abundant fuel supplies and declining crude oil costs. Today’s most common price in the country is $1.99 with $1.71 seen in parts of New Jersey. AAA says gas prices are likely to remain low for the remainder of the summer compared to recent years.
July 27, 2016
Shares of Apple are surging today after the maker of the popular iPhone reported better-than-expected quarterly earnings after the Stock markets closed on Tuesday. The company sold 40.4 million iPhones during the quarter, above the 40 billion expected, though down from the 47.5 million from the year-ago comparable quarter. Apple beat on earnings per share of $1.42 versus the expectations of $1.39. The company also guided next quarterly earnings higher.
In the housing market, Pending Home Sales edged higher in June, but below estimates due in part to the low supply of homes for sale and affordability constraints. The National Association of REALTORS® reported that Pending Home Sales rose 0.2%, below the 1.1% expected. The small gains come despite mortgage rates being near all-time lows. Pending Home Sales are up 1% from June 2015. Housing inventory is now 6% lower than last year this time, while home prices are rising faster than wage and income growth.
Mortgage rates edged higher in the latest week, though still remain just above all-time lows, reports the Mortgage Bankers Association (MBA). The MBA also said that mortgage application volume decreased as its Market Composite Index, a measure of total mortgage application volume, fell 15% in the latest week as the summer doldrums took hold. The refinance index fell 15%, while the purchase index decreased 3%. The MBA also reported that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.69% from 3.65 percent, with points unchanged at 0.36.
July 25, 2016
The financial markets get set for a big week of events that includes a packed economic calendar with data on U.S. economic growth, housing, manufacturing and consumer attitudes. In addition, the heart of earnings season will take place this week. The big event will be the two-day Federal Open Market Committee meeting that kicks off tomorrow and will end Wednesday with the 2:00 p.m. ET release of the monetary policy statement. There is no chance of an interest rate hike to the short-term Fed Funds Rate, but the language may give some clues for hikes in the future.
A big merger deal took place on Monday which brings an end to independence at multi-national technology company Yahoo, after it was announced that Verizon is purchasing the storied company in a deal worth $4.83 billion. Yahoo burst onto the scene early in the Internet age in 1994 founded by Jerry Yang and David Filo at Stanford University. The website was originally called “Jerry and David’s Guide to the World Wide Web.” Soon after the site was renamed, Yahoo, with the backronym “Yet Another Hierarchical Oracle.” The deal is expected to be approved by regulators and should be finalized by early 2017.
U.S. Stock markets begin the week lower after the closely watched S&P 500 Stock Index closed higher last Friday, capping four straight weeks of gains. Friday’s positive close for the S&P was the seventh all-time high in the previous 10 trading days. A strengthening of U.S. economic data in the past two to three weeks, positive earnings coupled with the low interest rate environment have propelled Stocks higher. The big question will be whether or not markets can push higher in the weeks to come in spite of such lofty levels.
July 22, 2016
In earnings news, GE reported better-than-expected earnings on earnings-per-share and revenues, but other components declined. In addition, despite beating expectations, it comes as the company lowered the numbers heading into the earnings release. “The diversity and scale of our portfolio enabled the company to perform well despite a volatile and slow growth economy,” GE Chief Executive Jeffrey Immelt said in a statement. Companies continue to beat lowered expectations – which is both good and bad.
The two-day Fed meeting kicks off on Tuesday and will end Wednesday with the 2:00 p.m. ET release of the statement. There is a zero percent chance of a hike to the short-term Fed Funds Rate, but the accompanying monetary policy statement may give some clues on future interest rate movements. The Brexit vote will be one of the main topics along with global and U.S. growth, inflation and the labor markets.
The closely watched Gross Domestic Product (GDP) report will be released next week and comes after the weak 1.1% reading for the first quarter of 2016. The Atlanta Fed is forecasting 2.4% growth for 2016 for the second quarter. Global investors will be watching closely to see if the world’s largest economy can achieve higher levels of growth. GDP is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period.
July 21, 2016
First-time home buyers fueled the rise in sales of previously owned homes last month as the housing sector continues to shine in a somewhat mediocre economy. The National Association of REALTORS® reported that Existing Home Sales in June rose 1.1% from May to an annual rate of 5.57 million units, above the 5.50 million expected. Sales are up 3% percent from June 2015 (5.41 million) and remain at their highest annual pace since February 2007 (5.79 million).The share of first-time home buyers was 33% in June, which is up from 30% in May, and a year ago, and is the highest since July 2012 (34%). Sales fell 1.3% in the Northeast, up 3.8% in the Midwest, were unchanged in the South, and ticked up 1.7% in the West.
Freddie Mac reported that mortgage rates edged higher for the second week in a row to 3.45% for the 30-year fixed conventional rate ($417,000 or less) with 0.5 in points and fees. The uptick in rates is due in part to the Brexit headlines easing, which pushed investors out of the safe haven of the Bond markets and into riskier assets, such as Stocks. When Bond prices decline, interest rates tend to push higher and vice versa. Freddie Mac went on to say that it doesn’t see “any significant movement in mortgage rates in the near-term.”
Americans filing for first-time unemployment benefits remained near 43-year lows in the latest week as the labor market continues its positive momentum. Weekly Initial Jobless Claims fell 1,000 to 253,000, below the 265,000 expected. Claims have now remained below 300,000, a threshold associated with a healthy labor market, for 72 straight weeks, the longest stretch since 1973. The four-week moving average of claims, which irons out week-to-week volatility, fell 1,250 to 257,750 last week.
July 20, 2016
Despite record low mortgage rates, total mortgage application volume declined in the latest week as did refinances and purchases. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of total mortgage application volume, fell 1.3% in the latest week as rates hold near 3-year lows. The MBAs refinance index decreased 1% from the previous week, while the seasonally adjusted purchase index fell 2%. The spring buying season is behind us and potential borrowers may be holding off on decisions to purchase or refinance for the next few weeks or so.
Stocks are higher again on Wednesday after solid earnings reports from Microsoft and Morgan Stanley. The Dow is on its longest winning streak since March 2013, having closed with gains for eight straight sessions. Yesterday’s record close … 18,559.01. Investors will now look to earnings to see if the numbers can continue to fuel the recent rally in equities. But at record highs, the smart money may be looking to take some profits.
Oil prices fell to a two-month low today due to rising stockpiles and a rising dollar. Oil is priced in dollars, so as the dollar rises, it takes more dollars to purchase oil. On Wednesday, a barrel of West Texas Intermediate oil had fallen below $45 from $52 on June 8. The decline in oil prices has also pushed gas prices at the pumps lower. The national average price for a regular gallon of gasoline fell to $2.19 on Wednesday, down from $2.32 a month ago and well below the $2.75 seen in July 2015.
July 19, 2016
The Commerce Department reported on Tuesday that June Housing Starts rose 4.89% from May to an annual rate of 1.189 million units versus the 1.165 million expected. May was revised lower to 1.135 million from 1.164 million. Single-family starts, the largest in the market, increased 4.4%. However, new construction has slowed in the past year. June 2016 Housing Starts were 2% lower than the 1.213 million units recorded in June 2015. Building Permits increased 1.5% from May to an annual rate of 1.153 million versus 1.150 million expected. The housing sector continues to be a bright spot in a “muddling along” economy.
Next week the regularly scheduled two-day Federal Open Market Committee meeting will begin on Tuesday and end on Wednesday with the 2:00 p.m. ET release of the monetary policy statement. After the late June decision from the United Kingdom to exit the European Union and the weak May Jobs Report, there is virtually a zero percent chance of a hike in the short-term Fed Funds Rate. The Fed Funds Rate is the interest rate at which depository institutions lends funds maintained at the Federal Reserve to other depository institutions overnight.
On the U.S. economic front, the Atlanta Federal Reserve Bank lowered its forecast for Gross Domestic Product (GDP) in 2016 to 2.4% on July 6, from the 2.6% forecasted on July 1. Back on May 4, the forecast called for growth of 1.7%. In addition, the International Monetary Fund lowered its forecast for U.S. growth to 2.2% from 2.4%, citing a weak energy sector, a strong dollar and turbulence abroad. The growth rate of real GDP measured by the U.S. Bureau of Economic Analysis (BEA) is a key metric of the pace of economic activity.
July 18, 2016
Bank of America reported better-than-expected earnings in its latest quarterly report led by a surge in its fixed income trading business. The bank reported earnings per share of $0.36 versus the $0.33 expected. Revenues for the quarter came in at $20.41 billion, down from $22.34 billion in the year-ago period. Within the report it showed that the bank’s delinquencies and charge-offs for its credit card business declined from the first quarter. Employee headcount is down 2.8% year-over-year due to the low interest rate environment.
Home builder sentiment edged lower in July due to lower foot traffic, though still remained in positive territory. The National Association of Home Builder Sentiment Index fell a point to 59, below the 61 expected. Any number over 50 indicates that more builders view conditions as good rather than poor. All three components declined in July, including current sales expectations, buyer traffic and sales expectations for the next six months. “The economic fundamentals are in place for continued slow, steady growth in the housing market,” said NAHB Chief Economist Robert Dietz. “Job creation is solid, mortgage rates are at historic lows and household formations are rising. These factors should help to bring more buyers into the market as the year progresses.”
U.S. Stock markets continued to edge higher to begin the new week after both the Dow Jones Industrial Average and the S&P 500 hit record closing levels last week. Today’s push higher comes from better-than-expected earnings from Bank of America and the failed coup attempt in Turkey over the weekend. An improving U.S. economy, the positive start to earnings season and easing headlines from the Brexit vote along with low interest rates are buoying the equity markets.
July 15, 2016
Retail Sales surged in June by 0.6 %, well above the 0.2% expected led by gasoline sales and retail sales. However, May was revised lower to 0.2% from 0.5%. Sales were up 2.7% from a year earlier. When stripping out volatile spending on cars and auto parts, sales were up 0.7 percent. Spending on building materials and gardening supplies jumped 3.9%, the most since April 2010.
Consumers were less confident in July as high end consumers fretted over the Brexit issues. The Consumer Sentiment Index fell to 89.5 in July, below the 93 expected and down from the 93.5 from the previous reading. “While stock prices quickly rebounded, an underlying sense of uncertainty about global prospects as well as the outlook for the domestic economy have not faded,” said Richard Curtin, a spokeperson for the index.
July 14, 2016
The June Producer Price Index (PPI), wholesale inflation, rose 0.5% versus the 0.3% expected, while Core PPI increased 0.4%, above the 0.1% expected. The year-over-year PPI was up 0.3%, the first annual increase since the end of 2014. The jump was due in part to rising oil prices and higher margins for financial services, reported the Labor Department. The Federal Reserve will be closely watching these wholesale inflation numbers as well as tomorrow’s inflation reading Consumer Price Index.
The Labor Department reported on Thursday that Americans filing for first-time unemployment benefits continue to hover near multi-decade lows after the strong June payroll numbers. The job market is in solid footing. Weekly Initial Jobless Claims remained at 254,000, below the 265,000 expected. Claims have remained below the 300,000 threshold for 71 consecutive weeks, the longest stretch since 1973.
In corporate earnings news, banking giant JPMorgan reported strong earnings in the latest quarter helped by loan growth and a tight control on operating expenses. The bank reported earnings per share of $1.55 easily beating the average analyst estimate of $1.43 per share. The bank also reported better-than-expected revenue of $25.2 billion. “JPMorgan Chase continued to perform well in all of our major businesses,” CEO Jamie Dimon said in a statement Thursday morning. “Outside of energy, both wholesale and consumer credit quality remained very good.”