MMRecap for Sept 22nd

Posted by Joel pate in Uncategorized. Tagged:

Although last week’s reports were not trend setters, some unexpected results came in. For instance, Monday’s Empire State Manufacturing index for September rose to 27.5 points. That’s almost unheard of in recent months and far above August’s reading of 14.7.
Industrial production across the U.S. fell -0.1% in August, which missed estimates of a 0.3% increase. Capacity utilization, the percentage of manufacturers running full-tilt, was 78.8% versus 79.1% the previous month.
At Monday’s closing, the Dow was the only one to land in positive territory, adding 43.63 points. The Nasdaq closed down 48.70 points, and the S&P 500 stayed out of trouble for the most part, falling a mere 1.41 points. The 10-year Treasury bond fell two basis points to close at 2.60%.
A comment Tuesday from OPEC ignited a downslide. They said early in the day that oil prices would likely go up this winter. That would have a negative effect on almost everyone.
But the earlier across-the-board losses that followed OPEC’s announcement turned to gains in a little more than an hour. The Dow closed up 100.83 points, the Nasdaq added 33.86 points and the S&P rose 14.85 points. The 10-year bond braced itself and closed again at 2.60%.
On Wednesday there were only a couple of reports, and neither of them had much impact on the markets. The consumer price index in August dipped 0.2%, a sure sign that inflation is not an issue right now. And the National Assn. of Home Builders showed its index rising to 59 in September from 55, but that had no impact on trading. In fact, the major stock indices were in the red, likely due to worries about the outcome of the Fed meeting taking place.
Instead, the results of the meeting had a positive effect on the market and set stocks on fire, at least temporarily. But Chairwoman Janet Yellen came by with a garden hose and did a little dousing. She said rates should remain low after the Fed ends its stimulus program. Individual Fed members believe rates will then be 1.375%. It appears that something will happen after the stimulus program ends, but the “when” is far from being nailed down.
The markets closed in positive territory on Wednesday. The Dow closed up 24.88 points, the Nasdaq rose 9.34 points, and the S&P 500 gained 2.59 points. The 10-year yield, which moves inversely to price, went up by 2 basis points, to close at 2.62%.
Thursday’s economic reports were off the mark, which was good and not so good. Initial jobless claims for the week ended September 13th fell into the “good” category, coming in at 280K. That was down 36K from the previous week. Continuing claims also dropped. For the week ended September 6, the total dropped to 2429K — 63K fewer than the previous week.
Housing starts and building permits in August both disappointed, coming in way below estimates. Starts plunged to an annualized rate of 956K from 1117K the previous month, while permits slid to an annualized rate of 998K, a decline of 59K.
The Philly Fed index on manufacturing conditions in September dropped to 22.5 from the August total of 28.
At the close of the day there was good news for stocks and bad news for bonds. The yield on the 10-year note closed at 2.63%, while stocks did pretty well. The Dow reached a new high and breached the 17,200 mark closing up 109.14 points, or 0.64%. The Nasdaq passed the Dow, percentage wise, adding 31.24 points, or 0.68%, while the S&P 500 finished up 9.79 points, or 0.49%.
Friday’s lone report, leading economic indicators, rates a D- in importance. Leading economic indicators are now owned by the non-profit Conference Board, which also produces the consumer confidence index. This indicator attempts to show the economic outlook for the next 6 to 8 months. The change in ownership may earn the report more respect than it has received in the past. But data is based on reports that have already been released, so an increase to 0.4% was predicted for August, but it was actually only 0.2%. Either way, it was down from the 1.1% increase in July.
The Dow was the only stock index to post a gain on Friday, adding 13.75 points. The Nasdaq fell 13.64 points, while the S&P dipped 0.96 points. The 10-year treasury yield fell 4 basis points to end the week at 2.59%.
The Mortgage Brokers Association put out its most upbeat release in weeks. The week of September 7, mortgage applications jumped 7.9% from a week earlier — something we haven’t seen in a long time. The unadjusted purchase index increased 14% compared with the previous week. That was 10% lower, however, than the same week a year ago. Refinances jumped 10% and were up from the previous totals.
“Application volume rebounded, coming out of the Labor Day holiday, even as rates increased to their highest level in the last few months,” said Mike Fratantoni, MBA’s Chief Economist. He added that, “Given the volatility in activity around the long weekend, it can be helpful to look at the change over a two-week span: refinance applications are down 1.4% while purchase applications are up 2.1%. Purchase volume continues to track almost 10% behind last year’s levels.”
The average contract interest rate for a conforming 30-year fixed rate loan increased to 4.36%, the highest level since June 2014.
Looking at this week we have eight reports spread over five days. The always-important report on existing home sales for August comes out today. Expectations range from an annual rate of 5.0 million units to 5.2 million. Let’s say 5.1M and see how it flies. Annual sales in July rose to 5.15 million units.
That will be followed on Tuesday by the FHFA House Price Index. No estimates are currently available.
Wednesday new home sales for August are due, and analysts believe that the results could come in at an annual rate of 420K to 435K. That would top the previous 412K.
On Thursday initial jobless claims are due. They are expected to come in at an annual rate of about 310K. Continuing claims, those applying for a second week or more of benefits, are expected to be about 2490K, which would be up from the previous report of 2429K.
Durable goods orders for August, which considers pricey purchases meant to last three or more years, are expected to drop about 18.5% after climbing 22.6% in July. Durable goods excluding transportation are expected to rise to 0.4% after falling to –0.7% in July.
On Friday the final estimate on Q2 GDP is predicted to come in at 4.6% or 4.7%, either of which would be very acceptable to the markets and very threatening to bonds.
The final report on Friday is the University of Michigan’s consumer sentiment survey for September, and it is expected to hold at a decent 84.6.

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