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ISM Manufacturing Index: The manufacturing index came in at 48.2 for December. It’s the lowest level since July 2009. There was contraction in both new orders and production. Employment is also down from November with a two-point decline to 48.1. This means that employment is shrinking in the manufacturing sector. In a positive, there was a 4.5-point increase in the index for new export orders to 51.0. Prices for raw materials are also down.

MBA Mortgage Applications: Applications were down 27% this week as refinances fell 37% and purchases were down 15%. It’s important to note that holiday weeks tend to make things bounce around a little bit. This data covers both Christmas and New Year’s. The average 30-year fixed-rate mortgage rate rose just one basis point to 4.20%.

International Trade: The trade deficit for November went down by $2.2 billion to $42.4 billion. Unfortunately, this isn’t a sign that exports are going up, but rather that trade across borders fell in November. Exports were down 0.9% to $182.2 billion. Loss leaders included both industrial supplies and consumer goods. Dragged down by dips in demand for both consumer and capital goods, imports experienced a steeper drop of 1.7%. They came in at $224.6 billion for the month. The petroleum gap was $900 million wider this month to come in at $5.4 billion. Oil prices remain low, but there was more travel going on during the holiday season.

Jobless Claims: Initial claims were 10,000 lower last week to come down to 277,000. The four-week average is down 1,250 to 275,750. Continuing claims are higher, up 25,000 to 2.230 million. The four-week average is down 4,000 to 2.22 million.

Employment Situation: Nonfarm payrolls saw 292,000 jobs added in December, well above estimates. Professional and business services added 73,000 jobs. Construction jobs are also benefiting from the winter we’ve been experiencing, adding 45,000 jobs. There was a 34,000 job increase in temporary help over the holidays. Trade and transportation added 31,000 jobs, while manufacturing lagged behind at 8,000. This was just enough to make up for the 8,000 job loss in mining. Government kicked in 17,000 jobs. Labor force participation was up 0.1% to 62.6%. Wages were flat and the average work week remained the same at 34.5 hours. There were also a total of 50,000 jobs added in revisions for November and October. Despite the addition of these jobs, unemployment is holding steady at 5.0%.

Mortgage News

Rates were mixed this week. One thing to note is that Freddie Mac has stopped providing data for 1-year adjustable rate mortgages (ARMs).

30-year fixed-rate mortgages (FRMs) averaged 3.97% with an average 0.6 point for the week ending January 7, 2016, down from last week when they averaged 4.01%. A year ago at this time, 30-year FRMs averaged 3.73%.

15-year FRMs this week averaged 3.26% with an average 0.5 point, up from 3.24% last week. A year ago at this time, 15-year FRMs averaged 3.05%.

5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 3.09% this week with an average 0.5 point, up from last week when they averaged 3.08%. A year ago, 5-year ARMs averaged 2.98%.

Stock Market

You know those action movies where two protagonists run across the ledge of a building? The leader tells the one that’s obviously more nervous, “Don’t look down!” Do yourself a favor and don’t look at your 401(k) this morning.

Stocks took an absolute pounding last week as investors are concerned about an economic slowdown in China. The stock market had one of its worst opening weeks of trading ever.

The Dow Jones Industrial Average was down 167.65 points Friday to close at 16,346.45. It finished down 6.19% for the week. The S&P 500 was down 21.06 points to end the week at 1,922.03, down 5.96% since last Thursday’s close. The NASDAQ was down 45.80 points to 4,643.63. It saw the biggest weekly decline, down 7.26% for the week

The Week Ahead

Tuesday, January 12

Quicken Loans Home Price Perception Index (HPPI) (10:00 a.m. ET) – Quicken Loans, the nation’s second-largest retail mortgage lender, releases data every month that compares what people think their homes are worth with the opinions of appraisers. Closer homeowner perceptions often make for smoother purchase and refinance transactions.

Quicken Loans Home Value Index (HVI) (10:00 a.m. ET) – Quicken Loans also releases data on home values, both on the national and regional level. Homeowners can gain a perception of whether values are increasing or decreasing and get a better idea of where they stand in terms of equity.

Wednesday, January 13

MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction.

Thursday, January 14

Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The four-week moving average of new claims smooths out weekly volatility.

Friday, January 15

Producer Price Index (PPI) (8:30 a.m. ET) – The Producer Price Index measures the average change over time in the prices received by domestic producers of goods and services.

Retail Sales (8:30 a.m. ET) – Retail sales measure the total receipts at stores that sell merchandise and related services to final consumers. Sales are measured by retail and food services stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.

Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production and the related capacity indexes and capacity utilization rates covers manufacturing, mining, and electric and gas utilities.

Consumer Sentiment (9:55 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.

One last note because we know Market Update brightens your Monday! Market Update will be released next Tuesday, January 19. Quicken Loans is closed Monday, January 18 in observance of Martin Luther King Jr. Day.

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