Personal Income and Outlays: Personal incomes were up 0.3% in August. Meanwhile consumer spending increased 0.4%. It was a good time to take advantage of the increased income because prices remained flat for the month and increased just 0.1% in core categories. Inflation has gone up just 0.3% since August of last year, and prices in the core categories are only up 1.3%. We have a while to go before we get to the Fed’s target of 2%.
Pending Home Sales Index: Pending sales were down 1.4% in August to 109.4. There were dips in three of the nation’s four regions. The Northeast declined 5.6%, while the South was down 2.2%. The only region to post a positive was the West, gaining 1.8%. Existing home sales have kept numbers down, though new sales are picking up the slack.
S&P Case-Shiller HPI: There seems to be a falloff in home prices based on recent House Price Index data. Although home prices increased 0.6% on a monthly basis in July, this is actually down 0.2% when the data is seasonally adjusted. The declines are occurring in 12 of the 20 cities measured. Chicago experienced the steepest drop, losing 1.2%. Meanwhile, year-on-year data still shows positives with prices being up 5.0%, whether they are seasonally adjusted or not. However, the weakness in this report does contradict last week’s FHFA data, which showed prices were up 0.6% in July.
Consumer Confidence: Continuing a string of contradictory data, consumer confidence and consumer sentiment appeared to be headed in opposite directions. In a month where the consumer sentiment report hit lows not seen since last year, consumer sentiment actually rose 1.5 points in September and beat consensus estimates by seven points. The present situation component is up more than five points to 121.1. This is the best reading since September 2007. It shows strength in consumer spending and the labor market. Speaking of the labor market, confidence in the ability to get jobs is also on the rise. Only 24.3% of those surveyed consider jobs as hard to get and 25.1% of Americans described jobs as plentiful. There was some weakness in expectations down 0.6 points to 91.0. The good news is that 19.1% of Americans see an increase in their income in the future. There’s also been an increase in the number of Americans with plans to buy homes, and more people plan on buying cars as well.
MBA Mortgage Applications: Despite the average rate on a 30-year-fixed mortgage dropping a basis point to 4.08, mortgage applications fell 6.7%. Refinances were down 8.0% and purchases were down 6.0%. Purchases are still on the high side, up 20% from this time last year.
Jobless Claims: Initial claims rose 10,000 to 277,000, a little higher than expected. Despite this the four-week average is down 1,000 to 270,750, 5,000 below this time a month ago. Continuing claims fell 23,000 to 2.219 million. The four-week average results are down 10,000 to 2.242 million.
ISM Manufacturing Index: Growth in the manufacturing sector slowed this month as the index came in at 50.2. New orders struggled to maintain their current levels, coming in at 50.1. Backlogs decreased this month, now shrinking at 41.5. This means manufacturers don’t have much incentive to hire workers to keep up with orders. Export orders are also in contraction for the fourth consecutive month at 46.5. Production is at 51.8, holding on better than the other measures. However, this will drop if there are more orders in the near future. Input prices, a measure of the cost of materials used to produce goods, is also dropping. The index reading for this category is down to 38.0.
Employment Situation: The Fed certainly has something to think about in their analysis of when to raise short-term interest rates above their current levels. The jobs report for September came in well below estimates at 142,000 jobs added to nonfarm payrolls. For perspective, the Econoday consensus had been for an additional 203,000 jobs to be added during September. Adding to the dismal news was the fact that 59,000 jobs were removed in revisions for July and August. Participation in the workforce also fell 0.2% to 62.4%. Wages were also flat and the average work week fell six minutes to 34.5 hours. Manufacturing payrolls continued to fall, down 9,000 in September. Mining jobs were also down 13,000. Retail did add 24,000 jobs, and professional and business services kicked in 31,000 jobs. Government jobs also bumped up 24,000. Overall though, not a good report.
It didn’t spur many new applications across the industry, but mortgage rates were either slightly down or held steady last week.
30-year fixed-rate mortgage (FRMs) averaged 3.85% with an average 0.6 point for the week ending October 1, 2015, down from last week when it averaged 3.86%. A year ago at this time, 30-year FRMs averaged 4.19%.
15-year FRMs this week averaged 3.07% with an average 0.7 point, down from last week when it averaged 3.08%. A year ago at this time, 15-year FRMs averaged 3.36%.
5-year Treasury-indexed hybrid adjustable rate mortgage (ARMs) averaged 2.91% this week with an average 0.4 point, unchanged from last week. A year ago, 5-year ARMs averaged 3.06%.
1-year Treasury-indexed ARMs averaged 2.53% this week with an average 0.2 point, unchanged from last week. At this time last year, 1-year ARMs averaged 2.42%.
“The Martian” came out this weekend. Friday’s wild ride in the stock market probably had more than a few traders feeling like they were gasping for breath on a foreign planet.
Stocks started the day down 1.5% as a lower-than-expected jobs report and higher oil prices weighed heavily on the minds of traders. Despite this, both the S&P 500 and Dow Jones Industrial Average finished the day up more than 1%. This is the biggest reversal on the high side since October 2011.
The Dow was up 200.36 points for the day to 16,472.37. It gained 0.97% on the week. Meanwhile, the S&P 500 posted a 27.54 point gain to finish at 1,951.36 for a 1.04% week-over-week advance. The NASDAQ was up 0.45% for the week after being up 80.69 points on Friday to close at 4,707.78.
The Week Ahead
Tuesday, October 6
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.
Wednesday, October 7
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.
Thursday, October 8
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.
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