Market Update

As much as it pains me to say this as a fan of the maize and blue, congratulations to the Villanova Wildcats on winning the NCAA Men’s Basketball Championship. It’s been one heck of a ride. One thing’s for sure – no matter what team you’ve been pulling for, the tournament always delivers its share of surprises, highs and lows.

Economic indicators have been up and down in their own way lately. Let’s jump into what happened this week.

Headline News

S&P Corelogic Case-Shiller HPI

Home prices were up 0.8% on a seasonally adjusted basis in the month of January. Prices were up 0.3% overall on the month and have risen 6.4% on the year.

There’s a bit of a bubble watch going on out West. Prices in Seattle are up 12.9% on the year. In Las Vegas, prices have gone up 11.1% annually, and San Francisco is up 10.2%. Other Western cities showing price growth include Los Angeles, Denver, San Diego and Portland, each over 7% growth.

The cities with the weakest annual growth include Chicago and Washington, D.C. – each at 2.4%.

Consumer Confidence

Consumer confidence readings fell 2.3 points to 127.7 in March, but the reading was still very strong.

Digging into the specifics, only 14.9% of Americans say jobs are hard to get, which is very favorable for employment. The weakness comes in stock market ratings. Only 35.4% of those surveyed see a yearly gain in the market, which is down from 40.1% in February and 51.0% in January. Only 5.5% of people expect to buy a house in the near future. It’s down a couple of percentage points from where it’s been in recent months.

Finally, inflation expectations sit at only 4.6% after being higher in the past couple of readings.

MBA Mortgage Applications

Despite the average rate on a 30-year-fixed mortgage rising one basis point to 4.69% in this report, applications were up 4.8% overall last week. Purchase applications were up 3.0%, and refinance applications rose 7.0%.

Gross Domestic Product (GDP)

The economy grew at a rate of 2.9% in the final reading for the fourth quarter of 2017. This beat the expectations for a 2.7% growth increase. A big part of this was a 0.2% upward revision in consumer spending. Now, total growth in this area sits at 4.0% for the quarter, as there was an equal uptick in the revision for consumer spending.

Nondurable goods spending is up 0.5% to 4.8%, which makes up for a 0.1% drop in spending on durable goods. Still, spending on durable goods was pretty strong because of hurricane-related replacement.

Nonresidential fixed investment was up 0.2% in revisions to 6.8% overall in the quarter. Meanwhile, residential investment was down 0.2% but is still up 12.8% overall.

The drop in inventories was just 0.5 point, which is less than it has been. We imported more than we exported, which subtracted 1.2% from overall GDP. Government purchases were up 3.0%, which was a positive for overall growth in the quarter.

An indication of where inflation stands, prices were up 2.3% on the quarter, according to this metric.

International Trade in Goods

The nation’s goods deficit increased by $100 million in February to $75.4 billion. However, what really stings was a $900 million upward revision to last month’s deficit.

Imports were up 1.4% on the month as imports of food rose quite a bit as did capital goods and industrial supply imports. There was also a noticeable increase in vehicle imports while imports of consumer goods had only a small uptick.

Exports were up 2.2%. There were big gains in automobiles, a sector that usually doesn’t see a lot of international orders. Capital goods, on the other hand, are an export strength, and this report is no different. Consumer goods, usually weak, were again down in February after rising in January.

Pending Home Sales Index

Pending home sales were up 3.1% to an index level of 107.5 in February. Because this measures the number of homes with a purchase agreement in place, it’s a good sign for future existing home sales. The only bad thing was that January numbers were revised lower so that it showed a 5.0% decline for that month.

In terms of regional data, the Northeast was up 10.3% on the month. In the South, these were up 3.0%. The Midwest and West were trailers, up 0.7% and 0.4%, respectively.

Jobless Claims

Initial claims last week came in at 215,000, down 12,000 from the week prior. The four-week moving average was down 500 to 224,500.

It is noted that these numbers aren’t reflecting accurate levels for Puerto Rico and the Virgin Islands because the procedures for filing unemployment claims there are still being affected by the hurricane aftermath.

On the continuing claims side, these were up 35,000 to 1.871 million last week. Despite this, the four-week moving average was down 12,750 to about 1.862 million.

Personal Income and Outlays

Personal incomes were up 0.4% in February. Americans are saving more though, as spending only rose 0.2%. The spending increase was just enough to keep up with the price rise in core categories as well as overall on the month.

This is known to be the Federal Reserve’s favorite measure of inflation. Prices have risen 1.6% in core categories and 1.8% overall on the year, just below the Fed’s 2% targets.

Wages and salaries were up 0.5% in this report. While spending was only up 0.2% overall, it did increase 0.3% when breaking out services. Americans are now saving 3.4% of their income, up 0.2% since January.

Consumer Sentiment

Consumer sentiment was down slightly in the final reading of March, falling 0.6 points to 101.4. However, this final reading was a 14-year high.

The current conditions component of the reading was up 6.3 points to 121.2. Lower income responders to the survey are feeling very good about where things are at. This accounts for much of the monthly gain.

Meanwhile, expectations were down 1.2 points on the month to come in at 88.8 there’s less confidence in the economy among those with higher incomes as the report notes they’re concerned about the Fed raising interest rates.

Inflation expectations over the next year are up just 0.1% to 2.8%. Consumers expect longer-term inflation over the next five years to be 2.5%, unchanged from the last reading.

Mortgage Rates

Mortgage rates didn’t change much, but the changes that were made were at least in the right direction. This might be the time to jump on the opportunity if you see a rate you like while in the market for a mortgage.

The average rate on a 30-year-fixed mortgage was down one basis point to 4.44%, with 0.5 points in fees. At the same time a year ago, the average rate was 4.14%.

Looking at shorter terms, with 0.5 points, the average rate on a 15-year-fixed mortgage was 3.90%, down a single basis point on the week. Last year, the average rate was 3.39%.

Finally, the average rate on a 5-year treasury-indexed hybrid adjustable rate mortgage (ARM) with 0.4 points fell two basis points to 3.66%. At this time in 2017, the average rate was 3.18%.

Stock Market

The stock market finally stemmed the tide of losses after a couple of weeks that were fairly brutal in which the indexes edged toward correction territory, helped by an uptick in the stocks of several technology companies.

Facebook, Google parent Alphabet, Netflix and Apple were all higher to end the shortened trading week, but the biggest moves were made by Microsoft. The company’s stock was up 2.1% following Thursday’s announcement of a major reorganization within the company.

The Dow Jones industrial average ended the week up 254.69 points to close at 24,103.11 points. This was a weekly increase of 2.42%. The S&P 500 finished at 2,640.87, up 35.87 points on the day and 2.03% on the week. Finally, the Nasdaq was up 1.01% on the week to close at 7,063.45, rising 114.22 points on the day.

The Week Ahead

Monday, April 2

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.

Wednesday, April 4

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, April 5

International Trade (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories and for more than 100 principal Standard International Trade Classification system commodity groupings.

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.

Friday, April 6

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.

While this week is lacking in volume of economic data, it makes up for it in terms of importance. Today we get a manufacturing report, and Friday brings the always important employment report. We’ll have it all covered for you next week.

Maybe the Easter bunny left too much sugar around my house this weekend, but I’m having a little trouble waking up today, and it’s Tuesday. Writing about a bunch of economic data and mortgage rates doesn’t help that problem. If you’re like me, we’ve got plenty of other home, money and lifestyle content you might like to check out – just subscribe to the Zing Blog below.

If you feel like embracing the laziness a little bit yourself this morning, you might decide the Japanese decor principle of wabi-sabi is right for you. It says there’s a certain homely feeling to life’s imperfections. Try telling your spouse that next time you don’t make the bed. I’m all for avoiding chores. Have a great week!

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