Mortgage rates pushed higher as the bond market sold off last week. Higher than expected manufacturing and employment numbers are making traders a little more confident and pushing money into stocks. The Federal Reserve also shook things up a little bit. There’s a lot going on, so let’s jump right in.
ISM Manufacturing Index: Growth in the manufacturing sector jumped 2.9 points to a much-higher-than-expected level of 57.8 in June. It’s the highest this index has been since August 2014. Hot employment levels are at 57.2, the second-strongest showing in this area since June 2011. Supplier deliveries were down at 57.0, which is good because it shows there’s a backup in the supply chain due to increased demand. New orders come in at 63.5 and production was at 62.4. Backlog orders were also high at 57.0, another indicator of increased demand. Finally, both import and export orders were higher.
MBA Mortgage Applications: Purchase applications were up 3.0%, which overcame a 0.4% drop in refinance applications to help overall applications increase 1.4% last week. The average rate on a 30-year fixed conforming mortgage rose 7 basis points to 4.20%.
International Trade: The United States trade deficit decreased by $1.1 billion in May to $46.5 billion. Exports were up 0.4% to $192.0 billion. The nation’s surplus service exports were up 1.0% to $64.8 billion. Exports were up 0.2% to $127.2 billion. Car and truck exports were up $600 million to $13.2 billion. Consumer goods came in at $16.7 billion after a $900 million rise. Imports were up 0.1% to $238.5 billion. There was a $1.3 billion increase in the amount of capital goods imported to $52.8 billion, pointing to increased domestic investment. In less positive news, crude oil imports were up $500 million, bringing the petroleum gap to $11.8 billion.
Jobless Claims: Initial claims were up 4,000 to 248,000 last week. This pushed the four-week moving average of claims up 750, coming in at 243,000. Continuing claims were up slightly as well, rising 11,000 to 1.956 million. The four-week average was up 6,750 to about 1.945 million.
Employment Situation: The number of jobs added to nonfarm payrolls in June beat expectations by 52,000, coming in at 222,000. The unemployment rate ticked up 0.1% to 4.4%, but this was probably affected by a corresponding increase to 62.8% in the labor force participation rate. Meanwhile, average hourly earnings were up 0.2% on the month and 2.5% on the year. There were 187,000 jobs added to private payrolls while 35,000 jobs were added to the government sector. Americans worked a little more with the average workweek increasing by six minutes to 34.5 hours. Looking a little deeper at the data, 35,000 jobs were added to professional and business services. Temporary positions were also up 13,000. The retail sector saw gains of 8,000. Just 1,000 manufacturing jobs were added, but 16,000 jobs became available in construction and 8,000 in mining.
Mortgage rates turned sharply higher last week. In addition to the strong manufacturing and employment reports, the members of the Federal Reserve didn’t appear to have firm agreement on how and when they should taper back purchases of mortgage-backed securities. If you’re in the market, you should strongly consider locking your rate because it may not be there if you wait too long.
First up, 30-year fixed-rate mortgage (FRMs) averaged 3.96% with an average 0.6 point for the week ending July 6, 2017, up from last week when they averaged 3.88%. A year ago at this time, 30-year FRMs averaged 3.41%.
On the shorter-term side, 15-year FRMs this week averaged 3.22% with an average 0.5 point, up from last week when they averaged 3.17%. A year ago at this time, 15-year FRMs averaged 2.74%.
Finally, 5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 3.21% this week with an average 0.5 point, up from last week when they averaged 3.17%. A year ago at this time, 5-year ARMs averaged 2.68%.
Every major stock index reacted positively to the employment data that beat expectations.
The Dow Jones industrial average finished the week with a gain of 0.30% after rising 94.30 points Friday to close at 21,414.34. The S&P 500 was up 15.43 points to finish the week at 2,425.18. This was a weekly gain of 0.07%. The Nasdaq was up 63.61 points for a weekly gain of 0.21% after closing at 6,153.08 Friday.
The Week Ahead
Tuesday, July 11
Quicken Loans Home Price Perception Index (HPPI) (10:00 a.m. ET) – Quicken Loans, the nation’s second-largest retail mortgage lender, releases data every month comparing what people think their homes are worth through appraisals. Similar opinions of value often make for smoother purchase and refinance transactions.
Quicken Loans Home Value Index (HVI) (10:00 a.m. ET) – Quicken Loans also releases data on home values, both on the national and regional level. Homeowners can gain a perception of whether values are increasing or decreasing and get a better idea of where they stand in terms of equity.
Wednesday, July 12
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
Thursday, July 13
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.
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, July 14
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.
Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.
Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.
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.
We get a little respite today, but it’s an absolutely packed week otherwise. If economics and mortgage aren’t your thing, we have plenty of home, money and lifestyle content that may peak your interest if you subscribe to the Zing Blog below. Today is Piña Colada Day in the world of wacky internet holidays. Maybe I can get caught in the rain outside my window with the piña colada cake recipe included in this blog post on no bake summer desserts. Then again, I think I’d rather eat it warm and dry. Have a good week!
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