Archive for June, 2014

MMRecap for June30th

Posted by Joel pate in Uncategorized. Tagged:

Stocks got off to a good start last Monday on the strength of the report on existing home sales in May. Actual sales crushed forecasts, rising to an annual rate of 4.89 million units, when 4.73 million were expected. In fact, this was the fastest month-over-month increase since August 2011.
In addition, mortgage rates have fallen, there is a better job market and the median sales price for an existing home in May was $213,400 — up 5.1% from a year ago.
New home sales in May soared to an annual rate of 504K units. They not only beat expectations, but they made April sales look weak by comparison, at a revised 4.66M units. New home sales in May also eclipsed April’s total of 425K units.
When the markets closed, the Dow had shed 9.82 points. The Nasdaq edged up 0.64 points, while the S&P 500 made an incremental downward move of 0.26 points. The 10-year yield ended at 2.62%.
Four reports were released Tuesday, and most of them revealed positive, if not earthshaking, results. But the day ended with numbers in the red, which worked in favor of the 10-year Treasury note. It closed at 2.59%.
In a separate survey by the Federal Home Finance Agency Housing Price Index, home prices remained flat in April after rising 0.7% in March. Also, the (almost) always important consumer confidence report rose to 85.2 from 83.0, but stocks continued to fall.
The expectation in the financial markets is that interest rate hikes will begin to rise in 2015. William Dudley, president of the New York Fed, agreed that this is a “reasonable forecast.” However, he admitted that forecasts “often go astray.”
The closing stock numbers were a sorry lot. The Dow dropped 119.13 points. The Nasdaq fell 18.32 points, and the S&P 500 was down 12.63 points.
The markets were not prepared for Wednesday’s shockingly low 3rd estimate on 1st quarter GDP. Analysts said it might fall -1.8% from the 2nd revision of -1.0%. But no one expected the -2.9% that was posted. Again, the miserable weather last winter was largely to blame, and that is probably a correct assumption. Many people were unable to leave their homes to shop, to go to work, to basically do anything. Conditions have improved considerably since then.
May orders for durable goods, big-ticket items expected to last three or more years, plunged to -1.0%after posting a healthy 0.6% increase in April. Excluding transportation, orders for durables fell -0.1% from the previous 0.4% gain.
Thursday was another up-and-down day on Wall Street, with St. Louis Fed President James Bullard driving the train. He said a rate hike could come during the 1st quarter of 2015. That statement drove the Dow and S&P 500 straight down, and big losses ensued. The more-subdued Nasdaq fell only -0.02%. It was also reported that disposable income rose 1.9% from one year ago, but today people are buying cars and houses, instead of groceries, restaurant meals, movie tickets and healthcare.
There were other reports released, including initial jobless claims for the week ended June 21. It came in at 312K, which was 2,000 less than the prior week. Continuing claims, those filing for a second or more weeks of unemployment benefits, numbered 2559K.
The final report for the day showed personal income in May had increased to 0.4% from the previous 0.3%, while personal spending was non-existent, coming in at 0% — a tad better than the previous -0.1%. The PCE core, a major inflation indicator, showed a 0.2% increase.
On Friday the University of Michigan issued its final June report on consumer sentiment, which rose to 82.5 from 81.2. That’s a “good” rating.
When the market closed on Friday gains were relatively small. The Dow was up 5.71 points, or 9.03%, while the S&P 500 added only 3.74 points. As usual, lately, the Nasdaq took top spot, rising 18.88 points, or 0.43%.
The Mortgage Bankers Association suffered setbacks during the week ended June 25. The seasonally-adjusted market composite index saw loan application volume fall by 1.0%, its lowest level since April. Applications to refinance also dropped 1% from the previous week. On an unadjusted basis, the index decreased 2%. The refinance share of mortgage activity held at 52%.
Although this week is a four-day week, thanks to the 4th of July holiday, it is not short on economic news. Today begins with the Chicago PMI (purchasing managers’ index) for June, which is forecast to fall to 64.7 from 65.5, which more-or-less is a non-report.
On Tuesday, the ISM index on manufacturing in June should edge up to 55.7 from 55.4. Construction spending in May follows and is expected to get a boost to 0.5% from April’s 0.2% reading.
On Wednesday the June employment numbers come into view, beginning with the ADP assessment of the June jobs report, which is not yet available. Next in line are factory orders for June, and they are expected to fall 0.3% from May’s 0.7% total.
Thursday offers a double whammy, as we get both weekly jobless claims and the employment report. Jobless claims for the week ended June 26 are expected to increase non-farm payrolls. They should rise by 3,000, which in the bigger picture is not a lot. The unemployment rate should hold at 6.3%.
The trade balance in June is forecast to fall to $45.0 billion from $47.2 billion, while the nonmanufacturing ISM could edge up to 56.5% from 56.3%.
Happy July 4th and a wonderful holiday weekend to all!

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