They’re calling for a high wind advisory in Michigan this morning that could knock the power and internet out, causing me and many others to end up taking an unscheduled day off, so I’m going to write Market Update as fast as I possibly can just in case. I know these are minor problems in comparison to the tornadoes that hit in parts of the South last night. I hope you and your loved ones are staying safe and healthy!
Economic data and market movements have been all kinds of unsettled in their own right recently. Let’s touch on the latest headlines!
This report was compiled with the assistance of summaries from Econoday.1 Here’s what you need to know!
MBA Mortgage Applications
Mortgage applications were down 17.9% overall as applications to refinance fell 19% and purchase applications are down 12% and have now fallen 33% on the year. With the stay-at-home orders, people just aren’t looking to buy homes at the moment, which is understandable.
One thing that’s helping the market a bit is that mortgage interest rates are staying low. They fell 2 basis points again last week to come in at 3.47% on a 30-year conventional loan.
Initial jobless claims came in at 6.606 million last week. This means that in the last 3 weeks, initial claims have totaled 16.78 million. The economic shutdown caused by COVID-19 is definitely showing its full effects. The 4-week average of initial claims was up about 1.599 million to come in at about 4.266 million.
On the continuing claims side, these were up 4.396 million after rising 1.275 million last week. Total continuing claims were at 7.455 million in the most recent data. The unemployment rate among those who qualify for unemployment insurance has ballooned from 1.2% before all this started to 5.1%. Meanwhile, the 4-week moving average was 3.5 million, up 1.439 million from the week prior.
Producer Price Index (PPI)
Prices for producers are down 0.2% for the month of March and up only 0.7% overall on the year. Meanwhile, when food and energy were taken out, prices were up 0.2% for the month and have risen 1.4% year. When further removing trade services, prices decreased by 0.2% and are up 1% compared to last March.
Energy prices were down 6.7% on the month and dragged down the rest of the index. If the trend holds nationwide like it is in Southeast Michigan right now, I would expect to see energy prices plummet in April. Depending on where you go, we’ve seen prices under $1 a gallon. On a yearly basis, energy prices were down 10.3% as of March. Food prices were flat for the month, and up 0.8% on the year. Meanwhile, trade services were up 1.4% from the month, but this metric is prone to some wild price swings.
Consumer sentiment for the beginning of April has started to move down in a big way, falling 18.1 points to come in at 71. The good news is that expectations for the future didn’t decline as much as they could have, which suggests that consumers see the extent of these measures to combat COVID-19 as being temporary.
On the current conditions side, it was a bit of a horror show, with sentiment in this area falling more than 30 points, which in terms of a decrease is more than double the previous record for the component. In comparison, a decline in expectations of less than 10 points seems minor when it would normally be considered more severe.
Inflation expectations over the next year came in at 2.1%, which is down 0.1% from the prior reading. In contrast, inflation expectations over the next 5 years were up 0.2% to 2.5%.
Consumer Price Index (CPI)
Inflation overall was down 0.4% and is up just 1.5% on the year. Again, the culprit here is energy prices. When food and energy were taken out, inflation was only down 0.1% in March and up 2.1% on the year.
Energy prices, impacted by less demand due to stay-at-home orders and a global oversupply of gasoline due to production increases in a price war between Saudi Arabia and Russia, were down 5.8% for the month. Meanwhile, food prices were up 0.3%. There’s been more demand with people stockpiling at the grocery stores. Looking at travel, the price of airfare was down 12.6%. Finally, the cost of staying away from home fell 6.8%. People aren’t staying at hotels.
The price and new vehicles were down 0.4% while the cost of clothing was down 2%. On the upswing was the cost of medical care, which rose 0.5% in March. Upticks in the cost of physician and hospital services made up for a decrease in the cost of prescriptions.
Mortgage rates were flat to lower across the industry last week. If you think now’s the right time to buy a house or refinance your current one, interest rates have certainly remained in your favor. Of course, the market is all over the place, so feel free to speak with a Home Loan Expert.
The average rate on a 30-year fixed conventional mortgage with 0.7 points paid in fees was flat last week at 3.33%. This is down from 4.12% last year.
Looking at shorter terms, the average rate on a 15-year fixed mortgage was down 5 basis points to 2.77% with 0.6 points paid in fees. This has fallen from 3.6% a year ago.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.3 points paid in fees was unchanged at 3.4%, down from 3.8% at the same time last year.
The Federal Reserve made an announcement of several programs designed to help shore up the economy. The markets had a huge positive reaction during the trading week that were shortened by Good Friday.
The Dow Jones Industrial Average was up 285.8 points Thursday to close at 23,719.37, up 12.67% over the last 5 days. Meanwhile, the S&P 500 was up more than 12.1% since last Thursday, the biggest such gain for the index since 1974. The index finished at 2,789.82, up 39.84 points for the day. Finally, seeing its biggest 5-day gain since 2009, the Nasdaq finished at 8,153.58, up 10.59% for the previous 5 days and rising 62.67 points Thursday.
The Week Ahead
Wednesday, April 15
First, a PSA that you don’t have to have your taxes done until July 15. Relax this Wednesday.
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.
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.
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.
Thursday, April 16
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.
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.
All that and stocks are coming up in next week’s Market Update. We’ll have it all covered!
Finally, we get that this is boring and not foremost in your mind right now. The good news is that we have plenty of home, money and lifestyle content to share with you if you subscribe to our email list below. Here are home maintenance projects you can tackle while you spend this time sitting around the house. Have a great week and be well!
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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