Every Monday morning, I come into work and write Market Update. It’s supposed to be written quickly so you have it by Monday afternoon, but unfortunately, my speech recognition software wasn’t cooperating this morning. Thankfully, I was able to restore a backup and get things moving. I’m definitely breathing a sigh of relief. The European Union might be doing the same, as Emmanuel Macron defeated Marine Le Pen in the French presidential election, helping to avoid what could have been a messy breakup.
Also happening last week were the monthly jobs report and a Federal Reserve rate decision, so let’s not delay any further.
Personal Income and Outlays: Incomes were up 0.2% in the month of March. Unfortunately, this didn’t lead to a rise in consumer spending, which was flat. Part of the reason for this may be that prices actually fell 0.2% on the month and prices in core categories were down 0.1%. For the year, prices are up 1.8% and have risen 1.6% in core categories. Wages and salaries were only up 0.1%. That being said, the savings rate did rise 0.2% to 5.9%.
ISM Manufacturing Index: Manufacturing sentiment came in below expectations, with this index falling 2.4 points to 54.8. This means the manufacturing sector is still growing, but at a slower pace in April than it was in March. Production was up one point to come in at 58.6. New orders settled at 57.5, the first time this number has been below 60 in five months. Backlogs continue to grow, with a reading of 57.0, which may increase the need for hiring. On the downside, inventories rose slightly.
MBA Mortgage Applications: Purchase applications were up 4.0%, but it wasn’t enough to make up a 5.0% drop in refinance application volume. As a result, overall applications were down 0.1%. The average rate on a 30-year fixed conforming mortgage was up three basis points to 4.23%.
International Trade: The U.S. trade deficit decreased just slightly, down $100 million to $43.7 billion. However, this was mostly due to weak domestic demand for international products. Imports were down 0.7% to $234.7 billion. Capital goods imports are down. Shipments are as well. Finally, imports have fallen for nonresidential construction. There was an increase of $1.2 billion worth of cars imported in March. The petroleum gap was also higher at $7.9 billion. On the export end, these fell 0.9% to $191.0 billion. Among the weakest categories were industrial supplies, automobiles and consumer goods. Exports of food and capital goods did rise in March.
Jobless Claims: Initial claims were down 19,000 to 238,000. Despite this, the four-week average was up by 750 claims to 243,000. On the continuing claims side, they were down 23,000 to come in at 1.964 million. Meanwhile, the four-week average was down 18,000 to 1.989 million.
Employment Situation: The economy added 211,000 jobs to nonfarm payrolls in April, well above consensus estimates for the addition of 185,000 jobs. The unemployment rate was down 0.1% to 4.4%. Of these jobs, 194,000 were added from the private sector, with 17,000 jobs being added in the government. Average hourly earnings were also up 0.3% and have risen 2.5% on the year. One negative in the report is that the labor force participation rate did decrease 0.1% to 62.9%. Employees also worked slightly longer hours in April, with the average workweek rising to 34 hours, 24 minutes.
Fixed rates were down or unchanged from last week, while adjustable rates were up just a little. With the Federal Reserve leaving short-term rates unchanged last week, it remains a great time to lock your rate.
Thirty-year fixed-rate mortgages (FRMs) averaged 4.02% with an average 0.5 point for the week ending May 4, 2017, down from last week, when they averaged 4.03%. A year ago at this time, 30-year FRMs averaged 3.61%.
Fifteen-year FRMs this week averaged 3.27% with an average 0.5 point, the same as last week. A year ago at this time, 15-year FRMs averaged 2.86%.
Five-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) averaged 3.13% this week with an average 0.5 point, up from last week, when they averaged 3.12%. A year ago, 5-year ARMs averaged 2.80%.
The S&P and NASDAQ both hit record levels. Apple also helped by hitting a record high.
The Dow Jones Industrial Average was up 0.32% for the week after finishing at 21,006.94, up 55.47 points for the week. The S&P 500 rose 9.77 points to close at 2,399.29, up 0.63% for the week. The NASDAQ ended the day at 6,100.76 points, up 0.88% on the week and 25.42 points for the day.
The Week Ahead
Tuesday, May 9
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, May 10
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, May 11
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, May 12
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.
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.
After some intense data this week, we get a little bit of a respite next week before closing with inflation and retail sales data. If mortgage rates and economics don’t get you out from under the covers on Monday, we have plenty of home, money and lifestyle content to share with you if you subscribe to the Zing Blog below. Given my own unforeseen computer troubles this morning, this would seem to be a great time to remind you to back everything up.
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