It took me a while to get around to it, but I finally finished “The Outsiders” this weekend. It strikes me that the book is at least partially about not growing up too fast and holding onto the promise of youth.
It’s interesting because we clearly are experiencing different effects based on COVID-19 across the country, but the stock market continues to go up, mostly on optimism at this point. I think investors might be hoping for the golden hours of an earlier day. I can’t say I blame them.
Economic data used in this report was provided by Econoday.1 Let’s get into it.
MBA Mortgage Applications
Overall mortgage applications were up 2.2% last week as there was a 5% rise in purchase applications. These are up 33% since early July last year.
Refinance applications tend to be much more sensitive to interest rate fluctuations, and the market has been favorable lately. The average rate on a 30-year conforming fixed mortgage was 3.26% last week, down 3 basis points in this index. As a result, refinance applications were up 0.4% on the week.
Initial jobless claims were down 99,000 last week at a still very elevated 1.314 million. Meanwhile the 4-week moving average was down 63,000 to about 1.437 million.
On the continuing claims side, things seem to be getting slightly better. The unemployment rate of those typically eligible for the insurance was 12.4%, down 0.5% on the week. Continuing claims were down 698,000 at 18.062 million. The 4-week moving average of continuing claims fell 636,000, settling at about 19.086 million.
Producer Price Index
On the production side, prices appear to be showing some deflationary signals. Overall prices fell 0.2% on the month, while prices paid by producers of goods and services have fallen 0.8% as compared to last year.
When food and energy were taken out, prices were down 0.3% in June. When these categories are removed from the overall numbers, inflation is up 0.1% on the year. Finally, when removing trade services as well, prices are up 0.3% on the month, but down 0.1% since last June. Trade services track wholesale and retail sales.
Breaking down the individual categories, trade services were down 1.8% as vehicle and machinery prices were down 7.3% in June. Service prices were down 0.3%, partially offset by a 0.2% uptick in goods prices.
On the goods side, energy prices were up 7.7% in June, but are still down 17.1% on the year. There was a 5.2% downturn on the price of goods on the production side, despite the price is still being up 0.8% compared to last June in this sector.
Signs of potential price reductions are worrisome because a deflationary environment could cause people to hold off on buying now with no expectation of prices rising. This would prolong the timeline for any economic recovery.
Mortgage rates hit another record low last week, according to Freddie Mac. If you’ve been looking to purchase or refinance a home and have the means to do so, it’s a really good time to take advantage of the interest rate environment we find ourselves in. Check in with one of our Home Loan Experts.
The average rate on a 30-year fixed mortgage with 0.8 points paid in fees was down 4 basis points to 3.03%. This has fallen from 3.75% last year.
Meanwhile, looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.8 points paid was 2.51%, down 5 basis points from the week prior and falling from 3.22% a year ago.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.3 points paid was up a couple of basis points to 3.02%. This is a drop from 3.46% last year.
Gilead Sciences said that its potential treatment for COVID-19, remdesivir, showed better clinical outcomes instead of the 2% in trials, including a 62% downtick in risk of death compared to standard treatments. In addition to creating optimism throughout the entire market, shares of the company were up more than 2%. In addition, tech stocks were up. With people sitting at home, we’re on computers and streaming services and doing more online shopping than ever.
The Dow Jones Industrial Average was up 0.96% on the week and 369.21 points on the day to close at 26,075.3. Meanwhile, the S&P 500 finished at 3,185.04. That’s up 32.99 points on the day and 1.76% on the week. Finally, the Nasdaq finished the week up 69.69 points at 10,617.44, up 4.01% on the week. That’s a new record!
The Week Ahead
Tuesday, 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.
Wednesday, July 15
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.
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.
Thursday, July 16
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 4-week moving average of new claims smooths out weekly volatility.
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.
Housing Market Index (10:00 a.m. ET) – The National Association of Home Builders (NAHB®) produces a housing market index based on a survey in which respondents from the organization are asked to rate the general economy and housing market conditions. The index is a weighted average of separate diffusion indexes, including present sales of new homes, sales of new homes expected in the next 6 months and traffic of prospective buyers in new homes.
Friday, July 17
Housing Starts (8:30 a.m. ET) – A housing start is registered when the construction of a new residential building begins. The start of construction is defined as the beginning of excavation of the foundation for the building.
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.
There’s a lot coming out next week, but the biggies will be around consumer prices, retail sales and consumer sentiment amid COVID-19. We’ll have it all covered for you in next week’s Market Update!
If economics and mortgage rates don’t have you pumped up this Monday afternoon, we certainly get it. Not to worry, we’ve got plenty of home, money and lifestyle content to share with you if you subscribe to our mailing list below. Here’s a great article on camping in your backyard to whet your appetite. After all, even though many of us are apart right now, Cherry Valance would remind us that you can always take a minute to look at the sunset. Have a great week!
1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.
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