>> Market Update
QUOTE OF THE WEEK... "If I had permitted my failures...to discourage me, I cannot see any way in which I would ever have made progress."--Calvin Coolidge, 30th U.S. President
INFO THAT HITS US WHERE WE LIVE... Those of us who haven't been discouraged by the housing market these past few years, can now see the progress we helped to achieve. Last week, more good news came regarding home prices. A leading data aggregator reported national home prices were UP 9.7% in January versus a year ago, the biggest annual increase since April 2006.And the 0.7% monthly advance they posted was their 11th in a row. Many observers feel these price gains will likely boost home sales during the first half of the year.
In addition, asking prices of homes listed for sale on a major online real estate portal were up compared to a year ago in 90 of the top 100 U.S. metros. The asking price gains for February were the largest since the recession began, UP 1.4% for the month and UP 7% versus a year ago. Their chief economist commented, "...buyers face a dilemma between buying now before prices rise even more, or later this year, when they'll have more inventory to chose from."
BUSINESS TIP OF THE WEEK... Think about what works well in your business, then focus on ways to improve it. It's easier to make changes to something that's functioning well, and making a good thing better can really pay off.
>> Review of Last Week
SETTING RECORDS... Starting Tuesday, the Dow set new record highs four days in a row, blasting past the peak it reached in 2007, well before the recession. Even the broadly based S&P 500 index ended the week just 14 points away from its all-time record high. What made investors feel so optimistic were some decent corporate earnings, better economic data, and the growing recognition that the government spending cuts known as the sequester probably wouldn't have that much of an economic impact once they started to kick in.
ISM Services bested expectations, at 56.0, showing solid expansion in the sector where over 80% of our jobs are found.Those jobs are now being created at a healthier pace, with 236,000 nonfarm payrolls added during February, enough to push the unemployment rate down to 7.7%, its lowest level in four years. The release of the Fed's Beige Book of economic observations from around the country concluded that the U.S. economy is now expanding at a "modest to moderate pace."
The week ended with the Dow up 2.2%, to 14397; the S&P 500 up 2.2%, to 1551; and the Nasdaq up 2.4%, to 3244.
The upbeat economic data that sent stocks skyward slammed bonds pretty hard. The FNMA 3.5% bond we watch ended the week down .94, at $104.31. Freddie Mac's Primary Mortgage Market Survey had average fixed mortgage rates mostly holding steady from the week prior. Their chief economist feels, "...these low mortgage rates are helping to revive the housing market." Underlining that point, mortgage applications were up 14.8% over the week before, according to the Mortgage Bankers Association.
DID YOU KNOW?... Inflation is the upward movement of prices, measured by gauges like the CPI and PPI. As prices rise, the dollar's value falls because it doesn't buy as much. Inflation has ranged from near zero to 23% the last 50 years, but the Fed's goal is 2%–3%
.
>> This Week’s Forecast
CONSUMERS GAINING, BUT SO IS INFLATION... This week we check up on consumers and forecasts show them increasing their contribution to the recovery. February Retail Sales are expected up by a larger amount than January, both with and without auto sales in the mix. Michigan Consumer Sentiment is also predicted to continue its upward trajectory. Remember, consumer spending makes up 70% of the economy.
But inflation appears to be gaining too. The PPI Producer Price Index, which measures what businesses pay for things, is forecast up a bit much for February, although Core PPI is still OK. It's the same story for the prices we pay, a little high as measured by the CPI Consumer Price Index, but Core CPI, which excludes food and energy, remains within Fed guidelines.
>> 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 Mar 11 – Mar 15
| Date |
Time (ET) |
Release |
For |
Consensus |
Prior |
Impact |
Tu
Mar 12 |
14:00 |
Federal Deficit |
Feb |
–$205.0B |
–$237.7B |
Moderate |
W
Mar 13 |
08:30 |
Retail Sales |
Feb |
0.5% |
0.1% |
HIGH |
W
Mar 13 |
08:30 |
Retail Sales ex-auto |
Feb |
0.5% |
0.2% |
HIGH |
W
Mar 13 |
10:00 |
Business Inventories |
Jan |
0.4% |
0.1% |
Moderate |
W
Mar 13 |
10:30 |
Crude Inventories |
3/9 |
NA |
3.833M |
Moderate |
Th
Mar 14 |
08:30 |
Initial Unemployment Claims |
3/9 |
350K |
340K |
Moderate |
Th
Mar 14 |
08:30 |
Continuing Unemployment Claims |
3/2 |
3.103M |
3.094M |
Moderate |
Th
Mar 14 |
08:30 |
Producer Price Index (PPI) |
Feb |
0.7%
|
0.2% |
Moderate |
Th
Mar 14 |
08:30 |
Core PPI |
Feb |
0.2%
|
0.2% |
Moderate |
F
Mar 15 |
08:30 |
Consumer Price Index (CPI) |
Feb |
0.5% |
0.0% |
HIGH |
F
Mar 15 |
08:30 |
Core CPI |
Feb |
0.2% |
0.3% |
HIGH |
F
Mar 15 |
08:30 |
NY Empire Manufacturing Index |
Mar |
6.5 |
10.0 |
Moderate |
F
Mar 15 |
09:15 |
Industrial Production |
Feb |
0.4% |
–0.1% |
Moderate |
F
Mar 15 |
09:15 |
Capacity Utilization |
Feb |
79.4% |
79.1% |
Moderate |
F
Mar 15 |
09:55 |
Univ. of Michigan Consumer Sentiment |
Mar |
77.8 |
77.6 |
Moderate |
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months... With inflation within Fed guidelines, according to the Fed's favorite measures, the Funds Rate should stay super low well into the future. 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 |
| Mar 20 |
0%–0.25% |
| May 1 |
0%–0.25% |
| Jun 19 |
0%–0.25% |
Probability of change from current policy:
| After FOMC meeting on: |
Consensus |
| Mar 20 |
<1% |
| May 1 |
<1% |
| Jun 19 |
<1% |
|
