Market Update

I hope everyone had a good Labor Day! I didn’t enjoy the fact that my Michigan Wolverines lost. But my sister, a Michigan fan by birth, started her freshman year at Michigan State last week and only rubbed it in a little when we saw her on Sunday. Lunch with her was fun.

Whatever you did this weekend, all good things must come to an end. It’s time to jump back into work mode. Let’s see what happened last week.

Headline News

International Trade in Goods

The trade deficit in goods came in much worse than predicted, rising more than 6.3% to come in at $72.2 billion in July. This data is closely watched in view of the ongoing trade disputes with foreign powers.

On the export side, these were down 1.7% to come in at $140 billion. There was a 6.7% downturn in the exports of food and feeds. Meanwhile, consumer goods were down 2.5% on the export side and there was a 1.7% dip in the capital goods category.

Adding to the deficit was the fact that imports were up 0.9% to $212.2 billion. We imported more foods and feeds, up 2.1% along with vehicles, which rose 1.6%. Industrial supplies imports were up 0.9%. The only category that saw imports decrease was consumer goods – these were down 1.5% on the month.

S&P CoreLogic Case-Shiller HPI

Home prices rose at a rate just slightly slower than expected in June, rising 0.1% on a seasonally-adjusted basis across this 20-city index. They were up 0.5% overall on the month and have risen 6.3% on the year.

Things are a little uneven when we take a look at the monthly results. Las Vegas led the way, up 1%, followed by Tampa at 0.6%. Meanwhile Miami, Phoenix and San Diego all had 0.5% price increases in June. However, despite prices being up in the West and Florida, the Northeast and Midwest took some lumps. New York City was down 0.7%, while Detroit was down 0.1% and Chicago prices were unchanged.

In terms of annual increases, Las Vegas is up 13% with Seattle following at 12.8%. At the other end, the nation’s capital is up only 2.9%, while Chicago and New York are only up 3.3% and 3.8%, respectively.

Consumer Confidence

Consumer confidence was up 5.5 points in August to come in at a much higher-than-expected level of 133.4. This is the highest confidence has been since the dot-com boom in October 2000. The numbers for July were also revised half a point higher.

What are the big reasons for the increased optimism? Fewer people think jobs are hard to get. This number is down from 14.8% to 12.7%. It’s also notable that 25.5% of people see incomes increasing, up 5.1% from July. Meanwhile, the number of people who see incomes falling was down 2.4% to 7%.

The present situation component was up 6.1 points to 172.2, while the future expectations portion of the index was up more than five points to come in at 107.6. Many more people also see the stock market going up than going down. Most consumers think interest rates are going up as well. Finally, in terms of buying plans, there were gains in all the categories across cars, homes and major appliances.

MBA Mortgage Applications

Applications were down 1.7% overall in the mortgage industry last week. Refinance applications fell 3% and purchase applications were down 1%.

Most people getting a mortgage right now are doing a purchase and this represents 61.3% of overall activity in the market. The average rate on a 30-year conforming fixed-rate mortgage was down slightly, falling three basis points to 4.78%.

Gross Domestic Product (GDP)

In the second estimate of the second quarter, the economy was judged to have grown at a rate of 4.2%, up 0.1% from the first estimate.

Nonresidential fixed investment was up 1.2% to come in at 8.5% growth for the quarter. There were big gains in intellectual property and equipment that helped. Net exports were also up a little bit more than in the previous estimate. Government purchases increased 0.2% to 2.3% this time around. Meanwhile, inventories were down a lot.

On the downside, residential investment fell from an initial estimate of falling 1.1% in the quarter to falling 1.6%. Consumer spending was down from 4% to 3.8% in the latest revision as spending on both durable and nondurable goods fell, while services spending remained unchanged. Inflation on the quarter was also flat at 3% on a seasonally-adjusted basis.

Pending Home Sales Index

Pending home sales were down 0.7% in the month of July to an index level of 106.2. This means the number of homes with a signed purchase agreement in place is down 2.3% from the same time a year ago.

Regions had declines that were about the same, but the West is the weakest, down 0.9% and 5.8% on the year. High prices have hurt affordability.

Jobless Claims

Initial claims for unemployment were up 3,000 last week to come in at 213,000. However, the four-week moving average was still down 1,500 on the week and is the lowest it’s been since December 1969 at 212,250.

Continuing claims were down 20,000 to come in at 1.708 million. Meanwhile, the four-week average was down 5,000 to settle at 1.731 million.

Personal Income and Outlays

Personal incomes were up 0.3% in the month of July, matching expectations, while spending increased by 0.4%. Meanwhile, prices were up 0.1% overall and 0.2% in core categories on the month. Prices have risen 2.3% overall and 2% in core categories on an annual basis.

Wages and salaries were up 0.4% while income results of sole proprietors and the money earned on personal interest pulled down overall incomes a little bit. On the spending side, vehicle sales were down a little bit which held back purchases of durable goods, but services spending was up 0.4%, a slight slowing of the pace from June. Real disposable income is also lower than what might be ideal, which puts downward pressure on consumer spending.

Consumer Sentiment

Consumer sentiment was slightly higher in the final reading of August, rising 0.9 points to come in at 96.2. However, this is still down in light of July’s 97.9 reading.

The current conditions component was down 4.1 points in August to come in at 110.3, which is the lowest reading in nearly two years. Expectations were down 0.2 points on the month to come in at 87.1.

Finally, inflation expectations were up slightly for both the one-year and five-year outlooks. Over the next year, consumers see inflation rising 0.1% to 3%. In the longer term, they expect it to go up 0.2% to 2.6%.

Mortgage Rates

Mortgage rates were moving in a couple of different directions last week, but they didn’t move too much. Freddie Mac notes that rates have been essentially unchanged all summer on a week-to-week basis.

One thing to note is that summer is vacation season and it’s very possible that trading activity will pick up in the coming weeks. If you see a number you like right now, it could be a good time to lock your rate.

The average rate on a 30-year fixed-rate mortgage with 0.5 points in fees was up a single basis point to 4.52% last week. This is up from 3.82% a year ago.

Looking at shorter terms, the rate on a 15-year fixed-rate mortgage was down one basis point to 3.97% with 0.5 points paid. At this time last year, the rate was 3.12%.

Finally, the average rate on a 5-year treasury-indexed hybrid adjustable rate mortgage (ARM) rose three basis points to come in at 3.85% with 0.3 points up front. Last year, the rate was 3.14%.

Stock Market

Trade tensions weighed down the stock market Friday. Canadians and Americans were unable to reach an accord on a revised version of the North American Free Trade Agreement (NAFTA). And there were mixed results for the week in the market. However, the stock indexes did manage the best month of August in more than four years.

The Nasdaq did have a good weekly performance led by Amazon which was up 5.6% and Apple, which was up 5.3% on the week. Part of the Apple bump might have something to do with the fact that it’s officially iPhone release season. The company is rumored to release as many as three new phone models along with new Macs at a keynote event to be held next Wednesday.

Did you have any Apple or Amazon stock in our Fantasy Stock League? If so, you may have had a pretty good week. It’s not too late to get involved in our competition for bimonthly prizes as well as a grand prize for the contestant with the best portfolio at the end of the year!

The Dow Jones Industrial Average closed down 22.1 points on the day to finish at 25,964.82, falling 0.33% on the week. Meanwhile, the S&P 500 was up 0.39 points on the day to end the week at 2,901.52. This was up 0.17% on the week. Finally, the Nasdaq closed up 1.14% on the week after rising 21.17 points Friday to finish at 8,109.54.

The Week Ahead

Tuesday, September 4

ISM Manufacturing Index (10:00 a.m.) – This index measures the general direction of manufacturing within the U.S. The qualitative survey of purchasing managers looks at production, new orders, order backlogs, inventories and supplier deliveries, among other factors.

Wednesday, September 5

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

International Trade (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories and for more than 100 principal Standard International Trade Classification system commodity groupings.

Thursday, September 6

Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing 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, September 7

Employment Situation (8:30 a.m. ET) – The employment situation report measures unemployment in the labor force as well as the sentiments of workers about the job market.

There’s not too much volume in terms of economic data this week, but between today’s manufacturing report and the employment report coming Friday, we get some heavy hitters. We’ll have it all covered for you next Monday in Market Update!

If it’s hard to get yourself motivated based on reports that can sometimes be very dry – I’ll admit it, we’ve got plenty of home, money and lifestyle content for you to enjoy if you subscribe to the Zing Blog below. With the passage of Labor Day, pretty much every child across the country is now back in school. I don’t have children yet, but I’m sure there are parents all over who are celebrating this time of year. Here are 10 tips to help your learner have a productive school year. Have a great week!

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