Market Update

I hope everyone enjoyed their weekend. We had some family over for my grandma’s birthday party and my uncle and I discussed everything from basketball to the bond markets. Yeah, we’re kind of all over the place.

Speaking of bonds, the Federal Reserve had a meeting last week. How did that go, you ask? More on that below, but let’s take a look at the data that moved the markets first.

Headline News

Pending Home Sales Index

This index, a measure of the number of existing homes with a purchase agreement in place for sale, was up 0.9% in June to come in an index level of 106.9.

All regions showed monthly gains, including the West, which posted a 0.7% gain, but still lags behind other regions, down 5.6% for the year. Total pending sales are still down 2.5% annually.

Personal Income and Outlays

Personal incomes were up 0.4% in June, and consumers put that money right back into the economy, as there was a matching increase in consumer spending. Inflation was up 0.1% both overall and when excluding food and energy. On the year, prices have risen 2.2% overall and 1.9% in core categories.

Digging a level deeper, the wages and salaries component of personal income was also up 0.4%. Economists are encouraged that the savings rate was quite a bit higher in last week’s gross domestic product (GDP), but the rate for last month was unchanged at 6.8%.

Spending on services was up a little bit, rising 0.6%, while there was no change in spending and durable goods.

S&P CoreLogic Case-Shiller HPI

Home prices were up 0.2% in the month of May on a seasonally adjusted basis. They’re up 0.7% overall on the month and have risen 6.5% annually.

There weren’t gains everywhere. Prices were down 0.3% in New York and 0.2% in Detroit.

Seattle was up 1.4% and has risen 13.6%. Prices increased 0.9% in Phoenix and 0.5% in San Francisco. Prices in Las Vegas rose 12.6% yearly.

Consumer Confidence

Consumer confidence was up 0.3 points to 127.4 in July. Only 15% of people think jobs are hard to get right now. Moreover, there was a gain of almost 3% in the number of people who think jobs are abundant at 43.1%. This helped the present situation component rise 4.2 points to 165.9.

On the downside, the expectations component moved back more than two points to come in at 101.7. Americans were a little more pessimistic about future income and job prospects last month. There was a 1% drop in the number of Americans planning to buy homes, which came in at 5.1%. An increasing number of people see the stock market going down with fewer people seeing it rising in the future.

Last month’s consumer confidence numbers showed a 0.2% rise in inflation expectations to 5.1%. Finally, June’s consumer confidence number was revised up 0.7 points to 127.1.

MBA Mortgage Applications

Overall applications were down 2.6% on the week. Applications to purchase homes fell 3.0% and refinancing applications were down 2.0%.

Part of this drop no doubt had something to do with rates, as the average rate on a 30-year-fixed conforming mortgage was up seven basis points to 4.4%. Purchases made up 62.9% of overall applications last week.

ISM Manufacturing Index

While manufacturing is still growing, it grew at a slower rate in July with this key manufacturing index being down 2.1 points to 58.1. Analysts think that the level of growth seen in June was probably unsustainable over the long term.

The good news for consumers is that much of the slowdown in manufacturing growth had to do with an increase in the number of deliveries made. Delivery delays were among the highest in the history of the index last month. Growth in new orders was also down slightly, but is still strong at 60.2. The buildup of the backlog also slowed a bit.

Raw material inventories were up, and analysts speculate that this might be related to people stockpiling to avoid the effects of the tariffs. Increased steel cost and the ongoing trade spat are listed as key concerns of the sample used for this survey.

Jobless Claims

Initial jobless claims were up just slightly, rising 1,000 to 218,000 last week. The good news is that’s the four-week average fell 3,500 to 214,500, one of the lowest averages in the last 50 years.

Continuing claims were down 23,000 to 1.724 million. Meanwhile, the four-week average fell 4,000 to 1.742 million.

Employment Situation

Nonfarm payrolls saw 157,000 jobs added in July, which missed consensus expectations for a 190,000-job increase. However, there were upward revisions for May and June which also added 59,000 jobs in these months. There’s a sentiment that we may be nearing full employment.

While 13,000 jobs were cut from the government sector, there were 170,000 jobs added to private payrolls. This included 37,000 jobs added in the key manufacturing category. Construction employers added 19,000 jobs, while trade and transportation added 15,000 new positions. On the other hand, mining payrolls were down 4,000 after rising 14,000 in June.

The unemployment rate and labor force participation rate remained at 3.9% and 62.9% respectively. Average hourly earnings were up 0.3% on the month and have gone up 2.7% on the year. The length of the average workweek decreased by six minutes to 34 hours, 30 minutes.

International Trade

The U.S. trade deficit was up $3.1 billion to $46.3 billion. It was expected to rise only $2.3 billion.

Exports were down 0.7% to come in at $213.8 billion. While service exports actually went up, capital goods, vehicles and consumer goods all fell.

Meanwhile, imports were up 0.6% to come in at $260.2 billion. Consumer goods imports, a weakness when it comes to U.S. trade, were up $2.0 billion to come in at $53.4 billion. Oil imports also increased $1.2 million at $14.1 billion for the month.

Mortgage Rates

Mortgage rates were up again for the second consecutive week. They’re in an upward trend over the last several weeks. The Federal Reserve also had a two-day meeting that concluded Wednesday. While it left the short-term interest rate that remains one of the key benchmarks for longer-term mortgage rates alone for now, the Fed signaled that the committee felt the economy was strong enough to handle rate hikes in the future. It’s expected that rates will increase two more times before the end of 2018.

If you’re in the market for a mortgage, now is an excellent time to go ahead and lock your rate.

The average rate for a 30-year-fixed conforming mortgage with 0.4 points in fees was up six basis points last week to 4.6%. This is up from 3.93% last year.

Looking at shorter terms, 15-year fixed-rate mortgages were up by six basis points on average to come in at 4.08% with 0.4 points. On an annual basis, rates are up almost a full point from 3.18%.

Six basis points must have been the magic number this week. The average rate on a 5-year treasury-indexed hybrid adjustable rate mortgage (ARM) with 0.2 points was up by that amount to come in at 3.93%. This is up from 3.15% at this time a year ago.

Stock Market

Apple was the stock market darling last week. Strong quarterly earnings led it to become the first company with a $1 trillion market cap.

You would be feeling pretty good right about now if you got into Apple stock around, say, 1997. By the time our Fantasy Stock League started, I think I got in on the action a little too late. Apple is up a little bit since I “bought” it, but the big gainers that are bringing my portfolio up 10.9% are Wendy’s and Eli Lilly. I’m doing well, but I can’t win. You should get in. There are some great prizes up for grabs.

The Dow Jones industrial average was up 136.42 points Friday to close at 25,462.58, up 0.05% on the week. Meanwhile, the S&P 500 finished at 2,840.35, up 13.13 points on the day and 0.76% on the week. Finally, on the Nasdaq, stocks were up 0.96% on the week to close at 7,812.02 after rising 9.33 points on the day.

The Week Ahead

Wednesday, August 8

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, August 9

Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to report 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.

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

Friday, August 10

Consumer Price Index (CPI) (8:30 a.m. ET) – The consumer price index measures changes based on the price of a fixed basket of goods and services purchased by consumers.

It’s really a very quiet week, but we do get some inflation data to end it. We’ll have it all covered for you in next week’s Market Update.

If mortgage rates and market data aren’t your thing on Monday morning, that makes total sense. The good news is we’ve got plenty of home, money and lifestyle content to share with you if you subscribe to the Zing Blog below. This Thursday is International Booklovers Day. Here are a few of our favorite financial books. What’s your favorite book or series of all time? I’ll get us going by saying I’m partial to Harry Potter. Let us know yours in the comments.

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