Personal Income and Outlays: Incomes rose 0.4% in April to go along with a 1.0% increase in spending. Contributing to this was a 2.3% increase in vehicle sales as well as higher gasoline prices. There was also a 1.4% increase in spending on nondurable goods and a 0.6% uptick in services spending. Digging deeper into the report, wages and salaries were up 0.5%. Prices were up 0.3% for the month and 0.2% in core categories on a yearly basis, and inflation is up 1.1% overall and 1.6% in the core.
S&P Case-Shiller Index: The index of home prices came in up 0.9% on both a seasonally adjusted and non-seasonally adjusted basis in March. Prices are up 5.4% overall on the year. There were monthly gains in 19 of 20 cities. Minneapolis led the way at 1.3%, followed by Detroit, San Diego, Seattle and Tampa. They all came in at 1.0%.
Consumer Confidence: Consumer confidence fell 2.1 points in May, coming in at 92.6. The percentage of people describing jobs as hard to get increased by 1.6% to 24.4%. In addition, 18.1% of people see fewer jobs in the future versus 16.7% in April. However, 16.2% of people are optimistic about the future of the jobs market versus 12.4% in the pessimist category. In more good news, 6.0% of those surveyed expect to buy a house in the next six months, up 0.7% from April. There was also a 0.8% increase, to 12.6%, in those expecting to buy a car. Meanwhile, inflation expectations were up 0.1% to 4.9%.
MBA Mortgage Applications: Mortgage applications fell 4.1% last week, despite the average rate on a 30-year fixed mortgage remaining unchanged at 3.85%. Purchase applications were down 5.0%, and refinance applications were down 4.0%.
ISM Manufacturing Index: The manufacturing sector seems to be picking up a little steam, as this metric was up 0.5 points over May levels, coming in at 51.3. This was helped by deliveries, which were up 5 points to 54.1. However, new orders were down 0.1 points to 55.7. Export orders are also unchanged at 52.5. However, backlog orders are shrinking, down 3.5 points to 47.0. Production was also down 1.6 points but remains at 52.6. Raw material inventories fell 0.5 points to 45.0. Employment is unchanged at 49.2, remaining in slight contraction.
Jobless Claims: Initial claims fell by 1,000 to 267,000 last week. Meanwhile the four-week average was down 1,750, coming in at 276,750. In contrast, both last week’s continuing claims and their four-week average were up 12,000. This put the numbers for last week at 2.172 million, while the four-week average was up to 2.163 million.
Employment Situation: The employment report was dismal, to say the least. Only 38,000 jobs were added. Consensus expectations were for 158,000 jobs. In addition, March and April were revised to show 59,000 fewer jobs added, combined. The unemployment rate went down from 4.9% to 4.7%. However, even this is deceiving, as the labor force participation rate went down 0.2% to 62.6%. It’s more a function of people dropping out of the labor force than added employment. The average workweek was also six minutes shorter at 34.4 hours. The one positive in this report was that wages and salaries were up 0.2%. There were 25,000 jobs added to private payrolls, with 13,000 jobs added on the government side. Digging a little deeper in, manufacturing payrolls were down 10,000. Construction was down 15,000. Mining continued its long decline, down another 10,000, and temporary workers were down 21,000. Overall, this is a little ugly and may give the Federal Reserve something to think about as it looks at where rates should be in the coming weeks.
International Trade: The trade balance was down $3 billion. Exports were 1.5% higher. Industrial supplies were up, as were cars, food, and consumer and capital goods. On the import side, imports were up 2.1%. Capital gains were the biggest contributor here, which is good for business investment. The petroleum gap stayed about where it was, down from $3.2 billion to $3.1 billion.
Mortgage rates were up just slightly across the board last week.
30-year fixed-rate mortgages (FRM) averaged 3.66%, with an average 0.5 point for the week ending June 2, 2016, up from last week when they averaged 3.64%. A year ago at this time, 30-year FRMs averaged 3.87%.
15-year FRMs this week averaged 2.92%, up from last week when they averaged 2.89%. A year ago at this time, 15-year FRMs averaged 3.08%.
5-year Treasury-indexed hybrid adjustable rate mortgages (ARM) averaged 2.88% this week with an average 0.5 point, up from last week when they averaged 2.87%. A year ago, 5-year ARMs averaged 2.96%.
Utilities saved some of the market’s bacon Friday, as gains in this sector helped mitigate some of the losses from financial institutions following an underwhelming jobs report.
The Dow Jones Industrial Average was down 31.50 points Friday to finish at 17,807.06. It was 0.37% lower for the week. The S&P 500 was largely unchanged for the week, up just 0.07 points. This was after the market finished Friday down 6.13 points to 2,099.13. The NASDAQ was down 28.85 points to finish at 4,942.52, gaining 0.18% for the week.
The Week Ahead
Wednesday, June 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, June 9
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, June 10
Consumer Sentiment (10:00 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.
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