Wednesday is an odd time to have a holiday. If you’re able to take time off but not the whole week, do you take the first half or the second half? Decisions, decisions.
There was a fair amount of economic data released last week ahead of the holiday. Did the economy put on a dazzling display or disappoint? Did the markets react with a boom or a whimper? Let’s find out.
New Home Sales
New home sales came in at a higher-than-expected level at 689,000 on a seasonally-adjusted annualized basis in May, up about 6.7% on the month. However, not all the news was good for builders.
The median price of a new home fell 1.7% on the month to come in at $313,000, down 3.3% on the year. On the other hand, these price decreases may be helping the sales growth, which is up 14.1% on the year.
On the supply side, 3,000 new homes were added to the market for a total of 299,000. However, this wasn’t enough to keep up with increased sales as the supply relative to sales fell to 5.2 months from 5.5 months.
On a regional basis, the South, the nation’s biggest growth region for new homes, had a 19.2% yearly gain in monthly sales. There’s a 40.3% gain in the Midwest annually, but monthly sales remained flat.
S&P CoreLogic Case-Shiller HPI
Home prices across Case-Shiller’s 20-city index rose 0.2% on a seasonally-adjusted basis, missing expectations for a 0.5% gain in April. Home prices were up 0.8% overall on the month and have risen 6.6% on the year.
Among the key cities highlighted in the report, prices came in lower than expected in New York City, and there was a rare dip in San Francisco real estate values. However, there was increasing strength in Washington, DC as well as Atlanta, Chicago, Boston and Detroit.
Consumer confidence was down 2.4 points in its June reading to come in at 126.4. Expectations for the future fell. There were fewer optimists when it came to income expectations, coming in at 18.8% of respondents vs. 21.4% in May. Slightly more people were pessimistic about income prospects.
However, overall levels of confidence are still pretty high, with current conditions being almost flat at 161.1. The number of Americans who think jobs are plentiful is down 2.1% at 42.1%, but at the same time, only 14.9% of Americans see jobs declining, down 0.7% on the month.
Inflation expectations remain the same for the next year at 4.9%. Meanwhile, there was also an increase in the number of people who see the stock market rising.
MBA Mortgage Applications
Mortgage applications were down 4.9% last week according to the Mortgage Bankers Association. Purchase applications fell 6.0% and refinance apps were down 4.0%. Refinances represented only 37.6% of total applications.
Mortgage rates for 30-year fixed conforming mortgages were up one basis point to 4.84% in this index.
Durable Goods Orders
New orders of durable goods were down 0.6% in May. Aircraft orders were again down 7.0%, down for the second straight month. Vehicle shipments were also down 4.4% with orders falling 4.2%. A fire at a major auto-parts supplier in Michigan affected both this and the industrial production report. Excluding transportation, orders were down 0.3%.
Core capital goods were down 0.2%. The good news is gains in April were revised up to 2.3% for the category, which is more than double the initial estimate. Shipments were down 0.1% in May, but they were also revised up 0.1% in April.
Turning to individual industries, primary metals had their orders fall 0.4% after being revised upward to a 2.4% gain in April. Fabrication was down 1.2%. Inventories and unfilled orders and primary metals and fabrication continue to increase following the imposition of tariffs by the White House. Total unfilled orders across all categories are up 0.5% with inventories up 0.3%.
International Trade in Goods
The nation’s goods deficit fell by $2.5 billion to $64.8 billion. Exports were up 2.1% with imports being up only 0.2%.
Exports were up 12.8% in the food and feeds category. There was also a 3.7% gain in capital goods. Consumer goods exports were up 3.2%. Capital goods imports were up 3.7% as well. It was enough to offset a 3.1% drop in industrial supply exports being blamed on fluctuations in oil prices.
On the import side, capital goods were up 3.4% and were the main reason for gains in this area. Imports of cars and trucks were down 1.2%, and the consumer goods category was down 1.0%. Industrial supplies fell here as well, down 0.7%.
Pending Home Sales Index
Pending home sales, a measurement of the number of existing homes currently under contract for sale, were down 0.5% to an index level of 105.9.
In the South, purchase agreements for existing homes were down 3.5% on the month. As the nation’s biggest housing region, the South’s loss was big enough to outweigh gains in all other regions across the country. The Northeast was up 2.0%, with the Midwest up 2.9%. Monthly gains in the West totaled 0.6%.
Gross Domestic Product (GDP)
Overall economic growth was up 2.0% in the final reading of the first quarter. This was below consensus estimates among economists for a 2.2% gain. However, core economic growth was unchanged at 2.6%.
Inventory growth and net export readings both had small losses after showing minimal gains in previous estimates. Consumer spending was also up only 0.9% despite prior higher numbers. Nonresidential fixed investment was up 10.4%, while investment on the residential side fell back 1.1%.
Government purchases were up a bit to 1.3%. Prices on the quarter were up 2.2% on a seasonally-adjusted annualized basis.
Initial jobless claims 9,000 last week to come in at 227,000. This moved the four-week average of initial claims up 1,000 to come in at 222,000.
Meanwhile, on the continuing claims side, these were down 21,000 to 1.705 million. The four-week average was down 3,000 to 1.720 million.
Personal Income and Outlays
Personal incomes were up 0.4% on the month of May. Consumer spending was up 0.2% to match inflation both overall and in core categories. Yearly inflation is at 2.3% overall and 2.0% in core categories.
Although pricing was up 0.2% overall, spending on services rose only 0.1%. There was a 0.6% uptick in nondurable spend as energy prices were on the rise. Durable goods, on the other hand, were only up 0.1%.
There was a 0.3% rise in wages and salaries and the savings rate was up 0.2% to 3.2%.
In the final reading of June, consumer sentiment was down 1.1 points to 98.2 points overall. Consumers’ assessment of the current condition of the economy was up 5.7 points to 116.5, which is a good sign for consumer spending.
The weakness came in the expectations component, which was down 2.8 points to 86.3 and is the lowest it’s been since mid-January. Consumers are worried about the effects of tariffs and the possibility of an ongoing trade war, according to analysts.
Mortgage rates were down again this week for the 30-year fixed. While not at historical levels, mortgage rates are still quite low. If you’re in the market to buy or refinance, it could be a great time to lock your rate.
The average rate on a 30-year fixed mortgage stood at 4.55% with 0.5 points in fees, down two basis points on the week. This is up from 3.88% at the same time last year.
Looking at shorter terms, a 15-year fixed mortgage with 0.5 points was unchanged at 4.04% last week, up from 3.17% a year ago.
Finally, a 5-year treasury-indexed hybrid adjustable rate mortgage (ARM) with 0.3 points averaged 3.7%, up four basis points on the week. It’s risen from 3.17% last year at this time.
It was a good day for the stock market in the last trading session of the first half of the year. The Dow had a good day as Nike gained more than 11% to reach a new record for the stock. Quarterly earnings and revenue for the company beat expectations. Banks were also up after the reported passing of the Federal Reserve stress test.
If you’re on Nike in our Fantasy Stock League contest, you’re probably feeling pretty good about yourself right about now. If you’re not in yet, check it out!
Despite Friday gains, the Dow Jones industrial average was down 1.26% on the week, closing Friday at 24,271.41, up 55.36 points on the day. Meanwhile, the S&P 500 was up 2.06 points on the day to close at 2,718.37, down 1.33% on the week. Finally, the Nasdaq closed at 7,510.30, up 6.62 points on the day and down 2.37% on the week.
The Week Ahead
Monday, July 2
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, July 4
Happy Independence Day! The stock and bond markets (along with Quicken Loans) are closed. Enjoy the fireworks!
Thursday, July 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.
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, July 6
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.
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.
Although a lot of the reports that cause fireworks in the market came out this week, the manufacturing and employment reports still have the potential to create a bit of a blast during the holiday week.
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