Economic Update week ending 8/29/14
S&P 500 edges up to set new record; best month since February. U.S. stocks closed out a strong month on a quiet note on today, with the S&P 500 posting a modest gain to close at a new record as the latest positive data helped extend a rally that had been briefly threatened by overseas concerns.Since falling to a near three-month low on Aug. 7, the S&P 500 has risen in 12 of the past 16 sessions. It is also closed out its fourth straight weekly advance and sixth positive month of the past seven. Friday’s gains pushed the index to its latest record close of 2,003.37, its third finish above 2,000 this week.
The Dow closed higher the week at 17,098.45, up 97.23 points from last Friday’s close of 17,001.22. The S&P closed at 2,003.37, 14.97 points up from last Friday’s close of 1988.40. The Nasdaqfinishes strong this week closing at 4,580.27, up 41.72 points from last Friday’s close of 4,538.55.
Mortgage rates hold steady this week. Data released Thursday by Freddie Mac, the 30-year fixed-rate average was unchanged at 4.1 percent with an average 0.5 point. It was 4.51 percent a year ago. Since late June, the 30-year fixed rate hasn’t been above 4.14 percent or below 4.1 percent.
The 15-year fixed-rate average inched up to 3.25 percent with an average 0.6 point. It was 3.23 percent a week ago and 3.54 percent a year ago. The 15-year fixed rate has drifted between 3.27 and 3.22 since late June.
Hybrid adjustable rate mortgages were up slightly. The five-year ARM average ticked up to 2.97 percent with an average 0.5 point. It was 2.95 percent a week ago and 3.24 percent a year ago.The one-year ARM average edged up to 2.39 percent with an average 0.5 point. It was 2.38 percent a week ago.
Reports showed, existing home sales rose for the fourth consecutive month to an annualized pace of 5.15 million, the highest of the year. On the other hand, new home sales fell for the third consecutive month to an annualized rate of 412,000 units. Also, Case-Shiller confirmed the slowing in national house-price appreciation that has occurred in other metrics, with the seasonally-adjusted national index down 0.1 percent in June but on a year-over-year basis up a solid 6.2 percent.
Meanwhile, mortgage applications showed an uptick, according to the latest data from the Mortgage Bankers Association. The market composite index increased 2.8 percent. The refinance index rose 3 percent, while the purchase index grew 3 percent. The refinance share of mortgage activity accounted for 56 percent of all applications, its highest level since March.
The Treasury Department sold $93 billion in notes this week: $29 billion in two-year securities, $35 billion in five-year debt and $29 billion in seven-years. The amounts are unchanged from the July auctions of the maturities. The Treasury also sold $13 billion in two-year floating-rate notes at an Aug. 27 auction.
The Treasury Department’s $35 billion sale of five-year notes may draw a yield of 1.645 percent, according to the average forecast in a Bloomberg News survey of six of the Federal Reserve’s 22 primary dealers. The securities, which mature in August 2019, yielded 1.645 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s sale of the notes yielded 1.72 percent, the most since April. The size of the offering is the same as at the past 47 auctions of five-year notes after peaking at $42 billion from November 2009 through April 2010. The July 20 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.81, versus an average of 2.73 at the past 10 auctions.
The benchmark 10 year treasury bond yield fell this week to 2.35% from its close of 2.40% last Friday. It was 2.89% August 30, 2013 and rose to 3.05% when the market opened on September 3, 2013. Bond rates are at a 14 month low.
At Fed meeting, Federal Reserve Chairwoman, Yellen, said the Fed is in no hurry to raise interest rates even as the labor market is improving. Market participants are watching for hints as to when the Fed will reverse an easy-money stance that has fueled stocks’ rally to record levels. The timing of a Fed rate increase remains unclear. While the unemployment rate has steadily declined, other gauges of the job market are harder to assess and may reflect continued weakness. These include high levels of people who have been unemployed for more than six months, many people working part time who would like full-time jobs, and weak pay growth. Record-low short-term rates will likely remain appropriate for a “considerable time” after the Fed stops buying bonds to keep long-term rates down. The Fed’s bond buying is set to end this fall.
Jobless claims drop again near post-recession lows. Initial claims for unemployment benefits fell by 1,000 to a seasonally adjusted 298,000 in the week ended Aug. 23, the Labor Department said Thursday. That was just below forecasts by economists surveyed by The Wall Street Journal. Claims for the previous week were revised up slightly. Weekly applications for claims have been running around 300,000 in recent weeks, and have fallen below that level four times over the last six weeks. The last time first-time claims were regularly at this level was in early 2006, at the height of the last economic expansion. These are the latest sign of improvement for the labor market
California gains 27,700 jobs in July. California’s unemployment rate was unchanged at 7.4 percent in July, and nonfarm payroll jobs increased by 27,700 during the month for a total gain of 1,371,500 jobs since the recovery began in February 2010, according to data released by the California Employment Development Department. But, California has made steady progress in the introduction of renewable energy, such as wind and solar power and these progresses have created jobs for unemployed California citizens.
More locally, Los Angeles County lost jobs in July, according to the report. Many of those losses, however, were in the realm of education-related positions generally unfilled during the summer months. Los Angeles County’s biggest July decline was in government, which shed 38,700 jobs. Some 33,900 jobs disappeared in local government educational services, which accounted for 88 percent of the decline.
While it seemed quiet last week in some of the offices with a lot of people out of town to end the summer, somehow our escrow openings were up! It will be interesting to see what September brings. It looks like we could see a surge in activity as fewer people will be on vacation. Lower interest rates, more inventory, and better loan programs, have begun to spur more interest!