I hope everyone had a good weekend! I didn’t do too much, so it was hard to get up and get moving this morning. I’m here. I made it. That’s about all I can say.
The stock market has been equally sluggish lately. But before we get there, let’s look at some of the fundamental economic data that hit this week.
MBA Mortgage Applications
Consumers took advantage of relative calm in the movement in mortgage rates to push applications up last week. Applications to refinance increased 10% while purchase applications were up 2%.
The average rate on a conforming 30-year fixed mortgage last week was 5.11% in the survey by the Mortgage Bankers Association, up a single basis point from the week prior. The increase in applications to refinance boosted their market share at the moment. Refinance applications made up 39.8% of overall mortgage application activity.
FHFA House Price Index
Home prices were up 0.3% in the month of August according to the Federal Housing Finance Agency and have gone up 6.1% on the year. This is down from a 6.6% annual pace of price appreciation in July.
The Pacific has the strongest monthly growth rate, up 0.8% and 7.3% annually. The Mountain region had unchanged prices, but it has the strongest pace of annual growth at 8.4%. The Mid-Atlantic was down 0.7% on the month and has the softest annual appreciation at 4% on the dot.
New Home Sales
New home sales were down 5.5% last month, coming in weaker than expected at a seasonally-adjusted annualized rate of 553,000. Numbers for August and July were also revised lower.
In a bit of good news, supply in the market did improve, up 2.8% on the month and 16.8% on the year at 327,000. The balance is suddenly tipping in favor of buyers as there’s 7.1 months’ worth of supply relative to sales.
Prices were up 0.3% to a median of $320,000. There may be room for more discounting on this price because, although prices are down 3.5% on the year, sales have dropped 13.2% in the same timeframe.
Regionally, sales were down 12% on the month in the West and have fallen 15.8% on the year. The Midwest is out front, up 6.9% on the month and 4.1% annually.
Durable Goods Orders
New orders of durable goods were up 0.8% in September. There was a doubling in orders of military aircraft that contributed to much of the gain. When these transportation orders were taken out, orders were only up 0.1%. Orders fell 0.1% in core categories.
Shipments of core capital goods were unchanged, which doesn’t point to good things for business investment. Primary metal orders rose, but even here, the gain was marginal. Still, annual growth in metal orders is near 20%.
The good news is that unfilled orders were up 0.9% in September. The consistently high growth rate points to the need for future hiring to fill the orders.
Inventories were up 0.7%, which will be a plus for future GDP reading. Although core capital goods shipments haven’t grown, overall shipments were up 1.3%.
International Trade in Goods
The nation’s current deficit was up by $500 million to $75.5 billion for the month of September. Exports increased 1.8%, while imports fell 1.5%.
Digging deeper into the numbers, and on the import side, capital goods imports were up 3.6% with a matching increase on the consumer goods side. Consumer goods tend to be an area of trouble for international trade.
On the export end, gains were seen in the areas of industrial supplies, capital goods and consumer goods. However, there was a downturn in food, feeds and beverages, which fell 9.2% on the month and 8.9% in September.
Initial jobless claims were up 5,000 last week to come in at 215,000. Claims in Florida and Georgia were up 7,000 post-Hurricane Michael. Nationally, the four-week average was flat at 211,750.
Continuing claims were down 5,000 to a 45-year low at 1.636 million. Meanwhile, the four-week average is also at a 45-year low at 1.647 million, which is down 6,750.
Pending Home Sales Index
Pending home sales were up 0.5% in the month of September to an index level of 104.6.
Because this is a measure based on the number of homes under contract for sale, it’s a strong indicator for the way existing home sales will go in October.
Gross Domestic Product (GDP)
In the first preliminary reading for the third quarter, GDP grew at a seasonally-adjusted annualized rate of 3.5%.
Business investment was up 0.8% on the quarter, but this is down from 8.7 and 11.5% in the two most recent quarters. Meanwhile, residential investment was down 4% which is the fifth decline in the last six quarters and points to potential problems for housing.
The nation’s trade deficit is also up to $99 billion in the quarter which pulled GDP down by 1.8 percentage. Analysts worry about the effects of tariffs. Imports are up 9.1%.
However, turning back to positives, inventories were up to $76.3 billion and contributed 2.1% to the growth of GDP, bouncing back from the downturn of the second quarter. Government purchases were up 3.3% and contributed 0.6% of the growth of the overall economy.
In this metric, consumer spending was up 4% while inflation grew at a rate of 1.7% on the quarter.
In the final reading of October, consumer sentiment fell 0.4 points to a level of 98.6. This is down 1.5 points from September’s final reading, but it’s still extremely strong.
The current conditions component is down more than two points which isn’t a good sign for consumer spending. Future expectations are down 1.2 points to come in at 89.3. There’s still a lot of confidence in the jobs outlook.
Inflation expectations over the next year were up 0.2% to 2.9%. However, over the longer-term, consumers expectations for inflation over the next five years were actually down 0.1% at 2.4%.
Mortgage rates were up just slightly last week. If you’re looking to refinance or purchase, it’s a good time to lock your rate as they’ve been trending upward.
The average rate on the 30-year fixed mortgage with 0.5 points in fees was 4.86% last week, up a single basis point from the week prior. At the same time a year ago, the rate was 3.94%.
Looking at shorter terms, the average rate on a 15-year fixed mortgage was up three basis points to 4.29% with 0.4 points paid. Last year, the rate was 3.25%.
Finally, the average interest rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) with 0.3 points paid was up four basis points on the week to 4.14%. This was up from 3.21% last year.
Stocks had a terrible day Friday. The S&P 500 even dipped into correction territory, which is a sign that there’s some new level setting going on.
If you don’t have investments yet, you can be thankful that you’re only participating in our Fantasy Stock League. Remember, there are prizes given for the best portfolio every other month as well as a grand prize for the best portfolio at the end of the year.
The Dow Jones Industrial Average was down 296.24 points Friday to close at 24,688.31. It’s down 2.97% on the week. The S&P 500 fell 3.94% on the week to close at 2,658.69, down 46.88 points on the day. The Nasdaq composite index closed at 7,167.21, down 3.78% on the week and 151.12 points on the day.
The Week Ahead
Monday, October 29
Personal Income and Outlays (8:30 a.m. ET) – This is a measurement of how much consumers are taking in as well as their corresponding spending. This also gives insight into how much is being saved.
Tuesday, October 30
S&P Case-Shiller HPI (9:00 a.m. ET) – The S&P Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S.
Consumer Confidence (10:00 a.m. ET) – The Conference Board surveys consumers on their feelings about current and future business and employment conditions as well as their future spending plans.
Wednesday, October 31
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, November 1
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.
ISM Manufacturing Index (10:00 a.m.) – This index measures the general direction of manufacturing within the U.S. The qualitative survey of purchasing managers looks at production, new orders, order backlogs, inventories and supplier deliveries, among other factors.
Friday, November 2
Employment Situation (8:30 a.m. ET) – The employment situation report measures unemployment in the labor force as well as the sentiments of workers about the job market.
International Trade in Goods (8:30 a.m. ET) – The Bureau of Economic Analysis has begun breaking out the goods from the remaining international trade numbers to get an idea of import and export estimates for GDP calculations.
It’s a pretty packed week. We’ll have it all covered for you next Monday in Market Update.
I’m dragging big time today, so I get it if this isn’t keeping you energized at this point on your Monday afternoon. Thankfully, we’ve got plenty of home, money and lifestyle content to share with you for a pick me up. With this Wednesday being Halloween, we thought we would look at some towns that really get into the spirit. Have a great week!
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