Thursday, June 27, 2013

Ben's Banter Sinks Stocks

Though Jeff Hurd always provide an update on the improving housing market, I thought that you have heard enough from me via this blog this week on that matter.   Perhaps you never get tired of hearing that the Real Estate Market is better every day!

Jeff covers the recent changes in the Stock Market.  As these changes impact all our sense of well being, I thought his perspective would be of interest to you.

Read and enjoy!!  Question me as needed!!!

Jeff HurdJeff Hurd
Loan Officer
780 Lynnhaven Parkway #420
Virginia Beach, VA 23452
Mobile: 757-329-1115
Fax: 866-396-6422

BEN'S BANTER SINKS STOCKS...
 
 The major stock indexes fell for the week as investors bailed on equities thanks to Fed Chairman Ben Bernanke's comments after the Fed meeting. The written FOMC Statement indicated the Fed would keep buying $85 billion per month worth of mortgage bonds and Treasuries in its quantitative easing program to boost the economy and keep interest rates down. But Bernanke later commented that if positive trends continue, the Fed could reduce bond purchases later this year and stop them completely by mid-2014. Some experts suggested investors overreacted, and it will be a long time before the Fed raises short-term interest rates.

It didn't help that the economic data coming in was positive, indicating things are indeed improving. The Empire State index of manufacturing in the New York region hit a three-month high in June, showing strong expansion after contracting in May. May Existing Home Sales and the NAHB home builders index surprised to the upside, as did the Philadelphia Fed index, which registered solid expansion for manufacturing in that region. But worried Wall Streeters should have noted CPI inflation was just 0.1% for the month and the May unemployment rate of 7.6% is a long way from the Fed's 6.5% target.

The week ended with the Dow down 1.8%, to 14799; the S&P 500 down 2.1%, to 1592; and the Nasdaq down 1.9%, to 3357. 
Fears the Fed might taper its bond buying sooner than expected hammered Treasuries and mortgage bonds. The FNMA 3.5% bond we watch ended the week down 3.04, at $100.12.Yet national average mortgage rates slipped last week, after edging up for over a month, according to Freddie Mac's Primary Mortgage Market Survey. Rates are still up a tad from a year ago, but remain at historically attractive levels. The Mortgage Bankers Association reported purchase loan demand down slightly for the week, but up 12% from a year ago,.

DID YOU KNOW?... Although investors worried the Fed might soon tighten monetary policy, during the past four Fed tightening cycles since the 1980s, the economy was growing an average of 3.68%, versus an average growth rate over the last 12 months of 1.8%.

>> This Week’s Forecast

NEW HOME SALES UP, GDP TEPID, INFLATION AND MANUFACTURING OK... Economic data this week should show mild but steady growth, offset by some minor disappointments. New Home Sales are expected to continue their move upward in May, while Pending Home Sales should indicate existing home sales will increase a few months out. The GDP Third Estimate is predicted to show continued economic growth at a modest rate.

Brighter news should come Thursday when Core PCE Prices are forecast to reveal inflation well under control in May. Personal Spending is expected to indicate the beleaguered consumer is staying in the game. The Chicago PMI reading of manufacturing health in the Midwest should dip a little but remain in expansion territory.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. 

Economic Calendar for the Week of June 24  June 28

 DateTime (ET)ReleaseForConsensusPriorImpact
Tu
Jun 25
08:30Durable Goods OrdersMay3.0%3.5%Moderate
Tu
Jun 25
10:00Consumer ConfidenceJun74.976.2Moderate
Tu
Jun 25
10:00New Home SalesMay460K454KModerate
W
Jun 26
08:30GDP – Third EstimateQ12.4%2.4%Moderate
W
Jun 26
08:30GDP Deflator – Third EstimateQ11.1%1.1%Moderate
W
Jun 26
10:30Crude Inventories6/22NA0.313MModerate
Th
Jun 27
08:30Initial Unemployment Claims6/22345K354KModerate
Th
Jun 27
08:30Continuing Unemployment Claims6/152.958M2.951MModerate
Th
Jun 27
08:30Personal IncomeMay0.2%0.0%Moderate
Th
Jun 27
08:30Personal SpendingMay0.4%0.2%HIGH
Th
Jun 27
08:30PCE Prices – CoreMay0.1%0.0%HIGH
Th
Jun 27
10:00Pending Home SalesMay1.5%0.3%Moderate
F
Jun 28
09:45Chicago PMIJun55.558.7HIGH
F
Jun 28
09:55U. of Michigan Consumer Sentiment – FinalJun82.682.7Moderate


>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... Even though there is talk of the Fed tapering its bond buying, economists still don't see the Fed raising the super low Funds Rate until the recovery is strong enough to bring unemployment down to 6.5%.Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
After FOMC meeting on:Consensus
Jul 310%–0.25%
Sep 180%–0.25%
Oct 300%–0.25%

Probability of change from current policy:

After FOMC meeting on:Consensus
Jul 31     <1 span="">
Sep 18     <1 span="">
Oct 30     <1 span="">
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