I hope everyone had a good weekend! I didn’t do much, but the Lions won, so that was good!
Another thing that hasn’t done much lately is the stock market, at least in terms of upward movement. Once again, it’s not a great day to look at the 401(k). But before we get there, let’s take a look at some of the other top headlines.
ISM Manufacturing Index
The manufacturing index came in higher than expected at 59.3 in November, up 1.6 points and indicating accelerating growth in the manufacturing sector.
New orders were up 4.7 points to 62.1. Backlogs are also building up, rising 0.8 points to 56.4. With the accumulation of orders, there’s an increased need for more employees and this metric is up 1.6 points to 58.4. Meanwhile, production is at 60.6 and supplier deliveries are also on the high side, coming in at 62.5.
Manufacturers are building up their inventories of raw materials, but finished goods aren’t seeing a corresponding inventory increase. A survey question tied to the actual cost of manufacturing is down almost 10 points, but costs are still ticking higher at 60.7.
Finally, export orders are still growing at 52.2, but they’re growing much more slowly, and analysts are worried that this may have something to do with tariff pressures. Another sign that the market may be feeling the squeeze from these policies is the fact that orders for primary metals were down.
MBA Mortgage Applications
Overall mortgage applications were up 2% on the week according to the Mortgage Bankers Association. Purchase applications rose 1%, and applications to refinance were up 6% on the week.
Applications were no doubt helped by the fact that the average rate for a 30-year fixed mortgage fell to 5.08% in this data. The percentage of people looking to refinance was up 2.5% last week, but purchase applications still make up 59.6% of the market. In a sign of moderating home prices, the average loan amount for a purchase application fell from $313,000 to $298,000.
The U.S. trade deficit increased by $900 million to $55.5 billion in October. There was a 0.1% downturn in exports and a 0.2% rise in imports.
Normally, we don’t get into deficits with individual countries here, but one thing that analysts are paying special attention to right now is the trade deficit with China given the ongoing trade dispute between the two countries. It increased from $40.2 billion to $43.1 billion in October. It’s something to note.
Meanwhile, we are exporting less food, animal feed and beverages, down to $10.3 billion from $11 billion in September. Civilian aircraft exports were also down about $300 million. Analysts again blame these decreases on the possible effect of tariffs. In one bit of good news, services exports were up at $69.6 billion.
On the import side, food, feeds and beverage imports were up a bit to $12.3 billion consumers were also importing more goods, as these were up $2 billion to $57.4 billion. Meanwhile, imports of services were up slightly at $47 billion.
Initial claims were down 4,000 last week to come in at 231,000. Despite this, the four-week average rose 4,250 to come in at 228,000.
On the continuing claims side, these are down 74,000 to 1.631 million. The four-week average remains at 1.667 million. Overall, claims remain very low in a historical context.
Fewer jobs were added to nonfarm payrolls than expected in November. The number came in at 155,000, 45,000 jobs short of consensus estimates. Last month’s number was also revised for the worse, down 13,000 jobs. The unemployment rate remained steady at 3.7%.
There were 161,000 jobs added to private payrolls, and 6,000 cut in the public sector. In the closely watched manufacturing area, 27,000 jobs were added with an additional 53,000 jobs added in trade and transportation. Meanwhile, 32,000 jobs were added in professional and business services.
The labor force participation rate continues to hold steady at 62.9%. Wages are only rising modestly at this point, up 0.2% on the month and 3.1% on the year. Meanwhile, workers are working less hours, as the average workweek is 34 hours, 24 minutes. There seems to be less hours and overtime in the manufacturing sector.
In the first reading for December, consumer sentiment held steady at 97.5.
Current conditions are up 2.9 points to come in at 115.2. Analysts think this points to good things for holiday spending. Offsetting this, future expectations fell 2 points to 86.1 which means people aren’t as optimistic over the future of the job market.
Inflation expectations were down. Over the next year, they fell 0.1% to 2.7% and over the next five years, they’re down 0.2% to 2.4%.
Mortgage rates were down across the board last week. When the stock market sells off as it did this week, bonds – including mortgage bonds – are often the beneficiary. If you’re in the market to buy a home or refinance your current one, it’s a good time to lock your rate today while we have this favorable bond market development.
They averaged 30-year fixed mortgage with 0.5 points in fees saw its rate decreased 6 basis points to 4.75%. A year ago, the rate was 3.94%.
Looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.4 points was down 4 basis points to settle at 4.21%. Last year at this time, the rate was 3.36%.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) fell 5 basis points to 4.07% with 0.3 points. This is up from 3.35% last year.
There wasn’t any one thing you could point to as the source of the trouble for the stock market on Friday and indeed all week. For starters, trade tensions between the U.S. and China aren’t abating. Beyond that, Apple stock was down 3.6%, taking away its yearly gains. Analysts aren’t impressed with lower iPhone sales. However, tech in general took a hit, with Facebook, Amazon, Netflix and Google’s parent company Alphabet all down on the day.
This week’s losses combined with all of its other poor performance recently meant the Dow Jones Industrial Average has lost all its gains for the year, while the Nasdaq also went into negative territory.
As we wind down our Fantasy Stock League, if your portfolio happens to be outperforming the market at all, you should feel pretty good about it. It’s been kind of a dreadful few weeks, but it is fun to see how you would do while learning and not having to worry about risking any real dollars.
The Dow finished Friday at 24,388.95, down 558.72 points on the day and 4.5% on the week. Meanwhile, the S&P 500 was down 62.87 points on the day and 4.6% on the week after closing at 2,633.08. Finally, the Nasdaq finished the week down 4.93% to 6,969.25 after falling 219.01 points Friday.
The Week Ahead
Tuesday, December 11
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.
Quicken Loans Home Price Perception Index (HPPI) (10:00 a.m. ET) – Quicken Loans releases data every month comparing what people think their homes are worth to 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 at both the national and regional levels. 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, December 12
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.
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.
Thursday, December 13
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to report 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, December 14
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.
Again, it’s only a moderate week in terms of volume, but there are a couple of heavy hitter economic reports in there. It’ll all be covered in Market Update next week.
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