| For
the week of May 3, 2010 – Vol. 8, Issue 18 |
Market
Update
INFO THAT HITS US WHERE WE
LIVE Last Tuesday's S&P Case-Shiller home price index reported
that homes in
20 major U.S. cities were WORTH MORE in February 2010 than they were in February
2009 -- the first year-to-year INCREASE in values in over three
years! The good news of
this 0.6% annual gain was tempered by a small monthly decline in prices from January to
February. But remember, February's unusually stormy weather make it a tough
month for real estate in much of the country.
Corroborating Case-Shiller, a second home price index also showed a
national
gain in
home prices for February 2010 compared to February 2009. This was the
First American CoreLogic HPI, an index including distressed sales, which
reported a home price
increase of 0.3% for the year.
Review of Last
Week
IT'S
ALL GREEK TO WALL STREET... The stock market ended down after a volatile
week whose off-putting news ranged from Greece to Washington to the Gulf of
Mexico. Greek bonds were downgraded to junk, while Portugal and Spain got
downgrades too. Goldman Sachs execs were grilled in Washington, then Friday came
news of a federal criminal probe into the firm. Finally, energy stocks got
hammered following a terrible oil spill in the Gulf of Mexico.
In
spite of these unfortunate events, the economy
continued to offer up signs of recovery. On Tuesday, following the
Case-Shiller annual home price INCREASE reported above, we got a big boost in the Conference Board's consumer
confidence number for April. The 57.9 reading put it at its highest level since August 2008. The week
ended with a great Chicago PMI measure of Midwest manufacturing. Then Advanced Q1 GDP came in UP 3.2%, marking the third
straight quarter of economic growth, with that all-important consumer spending
UP 3.6%!
Things
weren't too shabby on the corporate earnings front either. Of the 170 S&P
500 companies reporting Q1 results, 130 of them beat earnings-per-share
estimates. Even better, 106 of these companies
topped revenue expectations, showing that strong earnings performance didn't
just come from belt-tightening.
For the
week, the Dow ended down 1.7%, to
11008.61; the S&P 500 was down 2.5%,
to 1186.69; and the Nasdaq was off 2.7%, to 2461.19.
Down-sliding
stocks and off-putting news at home and abroad sent investors scurrying to bonds
which sent prices up even after Friday's positive economic reads. The FNMA
30-year 4.5% bond we watch closed UP 75 basis points for the week, ending at
$100.84.
National
average
mortgage rates
are holding steady,
still at historically low levels, according to Freddie Mac's weekly survey.
This Week’s
Forecast
INCOME, INFLATION, JOBS... A slight gain
in Personal Income is
expected today, along with a tick up in the PCE inflation measure.
ISM Manufacturing and
ISM Services numbers
should show those sectors continuing to expand. Tuesday, March Pending Home Sales will be
interesting, as we'll see if lots of people signed contracts to get in on the
tax credit. The week's biggie is Friday's April Employment Report.
Jobs should continue to be added at a modest pace, although the monthly increase
in workforce will probably keep the Unemployment Rate level.
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 May 3 – May 7
| Date |
Time
(ET) |
Release |
For |
Consensus |
Prior |
Impact |
| MMay
3 |
08:30 |
Personal Income |
Mar |
0.3% |
0.0% |
Moderate |
| MMay
3 |
08:30 |
Personal Consumption Expenditures (PCE) |
Mar |
0.6% |
0.3% |
HIGH |
| MMay
3 |
10:00 |
ISM Index |
Apr |
60.1 |
59.6 |
HIGH |
| TuMay
4 |
10:00 |
Pending Home Sales |
Mar |
5.0% |
8.2% |
Moderate |
| WMay
5 |
10:00 |
ISM Services |
Apr |
56.0 |
55.4 |
Moderate |
| WMay
5 |
10:30 |
Crude Inventories |
5/1 |
NA |
1.96M |
Moderate |
| ThMay
6 |
08:30 |
Initial Unemployment Claims |
5/1 |
440K |
448K |
Moderate |
| ThMay
6 |
08:30 |
Continuing Unemployment Claims |
5/1 |
4.600M |
4.645M |
Moderate |
| ThMay
6 |
08:30 |
Productivity–Prelim. |
Q1 |
2.8% |
6.9% |
Moderate |
F
May 7 |
08:30 |
Average Workweek |
Apr |
34.0 |
34.0 |
HIGH |
| FMay 7 |
08:30 |
Hourly Earnings |
Apr |
0.1% |
–0.1% |
HIGH |
| FMay 7 |
08:30 |
Nonfarm Payrolls |
Apr |
187K |
162K |
HIGH |
| FMay 7 |
08:30 |
Unemployment Rate |
Apr |
9.7% |
9.7% |
HIGH |
Federal Reserve Watch
Forecasting Federal Reserve policy changes
in coming months Coming out of last week's FOMC meeting, the Fed didn't
change its policy to keep interests rates at the current level for an "extended
period." Economists are now pushing off any rate hike to the end of this 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
|
| Jun 23 |
0%–0.25% |
| Aug 10 |
0%–0.25% |
| Sep 21 |
0%–0.25% |
Probability of
change from current policy:
| After
FOMC meeting on: |
Consensus
|
| Jun
23 |
5% |
| Aug
10 |
10% |
| Sep 21 |
17% |
|
|
|
The material provided is for informational and
educational purposes only and should not be construed as investment and/or
mortgage advice, or a commitment to lend. Although the material is deemed to be
accurate and reliable, there is no guarantee of its accuracy. The material
contained in the newsletter is the property of Real Estate Mortgage Network and
cannot be reproduced for any use without prior written consent. It is designed
for real estate and other financial professionals only. It is not intended for
consumer distribution. The material does not represent the opinion of Real
Estate Mortgage Network. Real Estate Mortgage Network is located at 70 Grand
Avenue, Suite 109, River Edge, NJ 07661. Company NMLS ID #6521. Georgia
Residential Mortgage Licensee #22495.
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