November 30, 2016
Oil prices gushed higher today after the Organization of Petroleum Exporting Countries (OPEC) said that it will cut production in an effort to curtail the oversupply of oil in circulation around the globe. OPEC said that it will decrease production by 1.2 million barrels per day by OPEC producers and cut by 600,000 barrels per day by non-OPEC producing countries. The news sent the Dow Jones Industrial Average to a record high of 19,222. West Texas Intermediate oil was trading at $48.44/barrel, +$3.23 at the time of this post.
A low supply of homes for sale was a big reason that contracts signed saw a slight increase in October, reports the National Association of REALTORS® (NAR). October Pending Home Sales rose 0.1% from September, squeaking out gains despite rising prices and tight supplies. Lawrence Yun, NAR chief economist, said, “Despite limited listings and steadfast price growth that’s now carried into the fall, buyer demand has remained strong because of the consistently reliable job creation in a majority of metro areas.”
Personal Incomes in October rose at their fastest pace since April while consumer spending continues to increase signaling the U.S. economy could end 2016 on a high note. Personal Incomes rose by 0.6% in October, above the 0.4% expected, while Personal Spending was up 0.3%, just below the 0.5% expected. The news sent visions of higher sales in the heads of retailers as the holiday shopping season is well underway. Within the report it showed that the Core Personal Consumption Expenditure (PCE), the Fed’s favorite inflation gauge, was somewhat tame rising by 0.1% from September while the year-over-year was up 1.7%.
November 29, 2016
After weak economic growth to begin 2016, the Bureau of Economic Analysis reported that the second reading of third quarter Gross Domestic Product surged ahead by 3.2%, the fastest pace in two years. The 3.2% was above the first reading of 2.9% and just above the expected 3.0%. Within the report it showed that consumer spending rose by 2.8%, above the original estimate of 2.1%. In addition, business investment rose sharply by 10.1%, well above the first reading of 5.4%. Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. It is considered the broadest measure of economic activity.
Consumers across the nation felt extremely confident in November ahead of the presidential election and were not impacted by the outcome of the results. Consumer Confidence surged ahead to 107.1, the best reading since the recession ended some time in late 2009 and well above the 100.0 expected. Within the report, all of the key metrics improved. “Consumer confidence improved in November after a moderate decline in October, and is once again at pre-recession levels. With the holiday season upon us, a more confident consumer should be welcome news for retailers,” said Lynn Franco, Director of Economic Indicators at The Conference Board.
Home price gains remained steady in September as prices in September were 0.1% above the July 2006 peak, reports the S&P CoreLogic Case-Shiller U.S. National Home Price Index. Within the report it showed that the 20-city Index saw a 5.1% annual gain. Gains in the West led the charge with Seattle seeing an 11% gain compared to a year ago. Portland came in second with a 10.9% rise annually.
November 28, 2016
The National Retail Federation (NRF) reports that 154 million consumers spent their hard-earned dollars over the Thanksgiving Day weekend, as the unofficial holiday shopping season kicked off. Americans spent an average of $289, down from $300 last year and were reeled in by blockbuster bargains from retailers. A large amount of shopping was done via the Internet, which set sales records for online shopping. The NRF’s survey of buyers say 44% bought online and 40% went to a store to make their purchases.
The closely watched Non-farm Payrolls report will be released on Friday where it is expected that employers added 180,000 new workers in November. The Jobs Report is a key metric in the Federal Reserve’s decision on interest rate policy. The Federal Open Market Committee meeting will take place on December 13-14 where it is expected that the short-term Fed Funds Rate will rise to the 0.50% to 0.75% range from the current levels of 0.25% to 0.50% levels. Potential borrowers whom will be directly impacted will be those looking for home equity, car and personal loans.
A leading provider of consumer, financial, and property information and analytics firm, CoreLogic, reports that cash sales in August made up 31% of all home sales, up for the second month in a row. The 31% is down 1.5% from a year ago, though still above the pre-crisis number of 25% of total sales. CoreLogic says that if the downward trend continues, the share of cash sales should decrease to 25% by mid-2019 and comes after last month’s prediction of of a time range in mid-2018.
November 23, 2016
The Commerce Department reported on Wednesday that New Home Sales unexpectedly declined in October from September to an annual rate of 563,000, below the 587,000 expected. September was revised lower to 574,000 from 593,000. The decline in October seems to be a temporary setback being that the job market continues to strengthen. The good news is New Home Sales are up 17.8% percent since October 2015. New single-family home sales dropped in the Northeast, Midwest and South in October, while rising nearly 9% in the West. The median sales price rose to $304,500 in October, up from $298,700 a year ago.
The Commerce Department reported that Durable Orders, or goods manufactured to last at least three years, jumped an unexpected 4.8% in October, well above the 1.1% expected. The components within the report were also strong. The manufacturing sector had been weak for the past few years and was the one sector of the economy that has not rebounded. The report could be a turning point for the manufacturing sector, but one set of numbers does not constitute a trend. This good report pretty much solidifies a Fed rate hike next month.
Americans filing for first time unemployment benefits continue to hover near multi-decade lows as the sector continues to signal a robust labor market. The Labor Department reported that Weekly Initial Jobless Claims rose 19,000 to 251,000 in the latest week, which was above the 243,000 expected. Claims have now remained below the 300,000 mark for 90 straight weeks, which is normally associated with a robust job market. The four-week moving average of claims, which strips seasonal abnormalities, fell 2,000 to 251,000.
November 22, 2016
The National Association of REALTORS® (NAR) reported on Tuesday that Existing Home Sales in October hit a 9.5-year high. Existing Home Sales rose 2% from September to an annual rate of 5.6 million units, above the 5.40 million expected. Year-over-year, sales are up nearly 6%. Lawrence Yun, NAR chief economist, says the wave of sales activity the last two months represents a convincing autumn revival for the housing market. “October’s strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply,” he said. “Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes.”
The closely watched Dow Jones Industrial Averaged eclipsed the 19,000 level in early trading on Wednesday as the post-election rally marches on. The new administration is seen as Stock friendly with lower taxes, decreased regulation for businesses and higher infrastructures spending. To put it in perspective, the Dow hit a low of 6,547 at the height of the Great Recession on March 9, 2009 … that’s a 188% rise to yesterday’s close of 18,956.
With Thanksgiving coming this Thursday, visions of Black Friday sales are dancing in consumers’ heads. Black Friday is typically the busiest shopping day of the year with 30% of annual sales coming in the period between Black Friday and Christmas. It is estimated that dollars spent per shopper will hit $938.58 in 2016, above the $805.65 in 2015. Total spending is expected to hit $655.8 billion in 2016, a 4.6% increase from the $626.1 billion spent in 2015. The earliest origins of the name “Black Friday” was given in Philadelphia, where it was used to describe the heavy and disruptive pedestrian and vehicle traffic and was used until about 1961. Years later, the term was meant that it pushed retailers from the “red” to being in the “black.”
November 21, 2016
A recent survey from the Chicago Federal Reserve Bank showed that economic activity is running a bit below its potential. The Chicago Fed National Activity Index improved slightly in October, but the three-month average declined. The report said that factory production, housing and consumer spending along with business orders mostly improved in October from September, while employment had a neutral effect. The three-month picture saw that inflation pressure from U.S. economic activity will be limited, said a spokesperson the the Chicago Fed.
The cost for a full Thanksgiving day meal fell modestly this year according to recent figures from the American Farm Bureau Federation. The prices for a classic Thanksgiving day dropped to $49.87 for 10 people, down from the all-time high of $50.11 registered in 2015. When adjusted for inflation, the cost of a Thanksgiving dinner for 10 is lower now than it was 31 years. A 16 pound turkey averaged $22.74 this year, down $0.30 from 2015.
The U.S. financial markets will be closed on Thursday for Thanksgiving. On Friday, the Bond markets will close early at 2:00 p.m. ET, while the Stock markets will close at 1:00 p.m. ET. Stock prices have been on a tear since the election results on November 8. The closely watched Dow Jones Industrial Average is trading at an all-time high on Monday at 18,916 as the new administration is seen as trying to cut regulations, increase infrastructure spending while at the same time lowering taxes.
November 18, 2016
Fed Chair Janet Yellen spoke on front of Congress yesterday on the U.S. economic landscape and monetary policy. Ms. Yellen confirmed the market concerns that inflation expectations would likely rise with President-elect Donald Trump’s economic plan and infrastructure spending plan. Ms. Yellen went on to say that the economy is close to full employment and employers could begin the push wages higher to attract workers, which is also inflationary. In addition, a rate hike could come “relatively soon”. A December hike to the short-term Fed Funds Rate is essentially on table with a 90% probability that the Federal Reserve will raise that benchmark rate.
Black gold, Texas Tea. Those words were used to describe crude oil back in the television sitcom “The Beverly Hillbillies” back in the 1960s. Just recently, the U.S. Geological Survey reported that the largest ever oil and gas deposit was discovered in the U.S. The agency announced that the Wolfcamp shale, located in the Midland Basin portion on Texas’ Perman Basin, is said to contain 20 billion barrels of oil and 1.6 billion barrels of natural gas liquid. The oil alone could be worth up to $900 billion!
November 17, 2016
The Commerce Department reported on Thursday that Housing Starts in October surged 25.5% from September to an annual rate of 1.323 million units. It was the highest level since September 2007. Within the report it showed that single-family starts, which make up the largest share of the market, jumped nearly 11%, while multi-dwelling starts skyrocketed by 68%. From October 2015 to October 2016, Housing Starts were up 23.3%. Building Permits, a sign of future construction, rose 0.3% from September, to an annual rate of 1.229 million units.
Inflation at the consumer level rose at its fastest pace in six months led by higher costs for gasoline at the pumps. The Consumer Price Index (CPI) rose 0.4% in October from September, which was in line with expectations. When stripping out volatile food and energy costs, the Core CPI rose by 0.1%, which was just below the 0.2% expected. Inflation data is a key metric in the Federal Reserve’s decision on monetary policy and is always a big topic at the Fed meetings.
The post-election Stock market rally pushed investors into riskier assets likes stocks and commodities and out of the safe haven of Bonds. As Bond prices moved lower, mortgage rates have pushed to their highest level of 2106. Mortgage provider Freddie Mac reports that the 30-year fixed conventional mortgage rate ($417,000 or less) rose to 3.94% with 0.5 in points and fees this week. Although mortgage rates hit their highest level this year, they are still are on the low end historically.
November 16, 2016
The wholesale inflation reading Producer Price Index (PPI) for October was unchanged versus the +0.3% expected, as reported by the Bureau of Labor Statistics. The decrease was led by higher costs of natural gas and gasoline, which were offset by a decrease in food prices and lower costs for services like financial advice and hospital outpatient care. The Core PPI, which strips out volatile food and energy, was -0.2%, below the +0.2% expected. Tomorrow’s Consumer Price Index, or inflation at the consumer level, will be closely watched by Fed members along with today’s PPI when considering monetary policy at next month’s Fed meeting.
Home builders reported that sentiment remained steady in November in the latest survey from the National Association of Home Builders (NAHB). However, the survey was completed before the presidential election, which caused mortgage rates to rise in the past week. The NAHB Housing Market Index held at 63 this month, just below the 64 expected. 50 is the dividing line between positive and negative sentiment. The NAHB said that builder sentiment has held above 60 for the past three months, indicating that the single-family sector continues to show slow, gradual growth.
The Mortgage Bankers Association (MBA) reports that mortgage rates posted their largest weekly increase since June 2013 after the presidential election results were tallied. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.95%, from 3.77%, with points increasing to 0.39 from 0.38 (including the origination fee) for 80% loan-to-value ratio loans. The MBA’s Market Composite Index, a measure of total mortgage application volume, plunged 9.2% in the latest week as rates pushed, while the refinance index fell 11% and the purchase index declined by 6%.
November 15, 2016
The consumer is alive and kicking heading into the all-important holiday shopping season, which could spark a boost in the U.S. economy. The Commerce Department reported that Retail Sales in October rose 0.8%, above the 0.6% expected, while September’s numbers were revised higher to 1.0% from 0.6%. The positive numbers in September and October were the best two-month rise since early 2014. Retail Sales are up 4.3% from a year ago.
Manufacturing activity rose in the New York State region after four straight months in negative territory. The New York Federal Reserve reported that its Empire Manufacturing Index climbed 1.5 in November, well above the -6.8 recorded in October and above the -0.5% expected. Within the report it showed that new orders and shipments also turned positive, though labor market conditions remained weak. Looking ahead, survey respondents were somewhat less optimistic about future business conditions in November than they were in October.
A record number of Americans are expected to fly this coming Thanksgiving holiday as air travelers take advantage of low-priced airfares. Industry trade group Airlines for America expects 27.3 million people will fly between November 18 and November 29 averaging 2.27 million people per day, up 2.5% from 2015. Back in 2006 and 2007, there were 26.2 million travelers during the Thanksgiving holiday. The average domestic airfare is around $352 this year, the lowest since 2011. The lightest travel day will be on Thanksgiving, with the busiest day on the Sunday after the holiday.