Weekly Market Update 5/21/14


supreme-logo-small1-150x150For the week of May 19, 2014 – Vol. 12, Issue 20

>> Market Update

QUOTE OF THE WEEK…“Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.” –Howard H. Aiken, American computing pioneer
INFO THAT HITS US WHERE WE LIVE… The good idea we have to keep hammering home to people is that real estate continues to recover. Friday saw Housing Starts shoot up 13.2% in April, the fastest pace in five months, to a 1.072 million unit annual rate. Those who doubt the housing recovery were quick to point out the very mild 0.8% increase in single family starts, ignoring their 9.8% gain over the past year. Yes, multifamily starts are up much more. But these units work well for two segments: young people wanting a flexible lifestyle and retiring baby boomers looking for less to maintain.
April Building Permits told a similar tale: up 8.0%, to a 1.08 million annual rate, with multifamily permits driving the train. Multifamily numbers are volatile month-to-month, so what’s important is the overall underlying trend, which is decidedly upward. Home completions fell for the month, which confirms that this winter’s weather had a big impact. As crews move outside, the total number of homes under construction but not yet finished was up 2.5% in April and is up 21.3% over a year ago. The NAHB builders confidence index dipped below 50, but there is a shortage of lots.
BUSINESS TIP OF THE WEEK… Stop multitasking! People don’t really do two things at once, they just keep switching their partial attention between tasks, which only creates stress. Give each job ALL your attention and you‘ll be amazed at what you accomplish. 

>> Review of Last Week

MIXING IT UP Investors really mixed it up all week on Wall Street, sending market indexes in both directions, while bonds attracted a flock of players seeking refuge from the big fracas in equities. At the end of the week, the final indexes wound up mixed: the Dow down some, the Nasdaq up some, and the S&P 500 essentially flat. The performance of individual issues by sector was also mixed, with stocks in five market sectors up and five market sectors down. The economy stayed top of mind all week thanks to a barrage of reports on a range of activities that came in, are you ready for this, mixed!
Ticking off the data points, Retail Sales were weaker than expected in April. The Producer Price Index was higher than forecast, stirring concerns about wholesale price inflation, although the Consumer Price Index provided no surprises. The New York Empire Manufacturing Index was up nicely, but the Philadelphia Fed Index showed factory activity down. Weekly Initial Unemployment Claims dropped 24,000, to below 300,000, while Continuing Claims fell to well under 2.7 million, both at their lowest levels since 2007! And Housing starts shot up, while Industrial Production declined.
The week ended with the Dow down 0.6%, to 16491; the S&P 500 down 0.62, at 1878; but the Nasdaq up 0.5%, to 4091.
In the bond market, heavy buying pushed up Treasuries and benefited many other issues. The 30YR FNMA 4.0% bond we watch finished the week up .82, at $105.10.National average fixed mortgage rates eased slightly for the third week in a row in Freddie Mac’s Primary Mortgage Market Survey for the week ending May 15. This is welcome news for the spring home buying season and might even spur some refinances. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.  DID YOU KNOW? We hear a lot about how social media is the future of marketing and consumer engagement, but a recent report reveals that email is nearly 40 times more effective at acquiring customers than Facebook and Twitter combined!

>> This Week’s Forecast

WHAT THE FED SAID, PLUS GAINS IN NEW AND EXISTING HOME SALES... Wednesday we’ll see the FOMC Minutes and find out what the central bankers went back and forth about at their April 30 confab. Analysts will be looking for signs of what may prompt the Fed to raise the Funds Rate, as well as its view of the economy. Thursday brings us two reads on housing, with Existing Home Sales expected to be heading back toward the 5 million mark and New Home Sales forecast up strongly, though not to the level they need to achieve.

>> 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 19 – May 23
DateTime (ET)ReleaseForConsensusPrior

Impact
W May 21 10:30 Crude Inventories 5/17 NA 0.947M Moderate
W May 21 14:00 FOMC Minutes 4/30 NA NA HIGH
Th May 22 08:30 Initial Unemployment Claims 5/17 305K 297K Moderate
Th May 22 08:30 Continuing Unemployment Claims 5/12 2.700M 2.667M Moderate
Th May 22 10:00 Existing Home Sales Apr 4.66M 4.59M Moderate
Th May 22 10:00 Leading Economic Indicators (LEI) Index Apr 0.5% 0.8% Moderate
F  May 23 10:00 New Home Sales Apr 415K 384K Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The Fed is expected by most economists to leave the Funds Rate at its super low level for the rest of the 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 18 0%–0.25%
Jul 30 0%–0.25%
Sep 17 0%–0.25%

Probability of change from current policy:
After FOMC meeting on:Consensus

Jun 18      <1%
Jul 30      <1%
Sep 17      <1%
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