For the week of May 1, 2017 – Vol. 15, Issue 17

>> Market Update 

QUOTATION OF THE WEEK... "A smile is hapiness you'll find right under your nose." --Tom Wilson, American cartoonist

INFO THAT HITS US WHERE WE LIVE ... If you work in the housing market, the latest economic reports ought to put a smile on your face. March New Home Sales zoomed up a way better than expected 5.8%, and are now 15.8% ahead of their pace a year ago. Hitting a 621,000 unit annual rate, sales rose for the third month in a row, demonstrating unusual stability in what can be very volatile sales, month to month. And remember, multi-family homes (townhomes, urban condos) aren't counted in this report. There was an increase of 3,000 unsold new homes where construction had yet to start, but the inventory of completed homes was unchanged.

Pending Home Sales took a little dip in March. This National Association of Realtors (NAR) index of contracts signed on existing homes had put up a string of impressive reads, so tight inventory was the problem, as demand is still strong. The NAR's chief economist observed, "Home shoppers are coming out in droves this spring," noting 42% of homes sold for asking price, or more. He forecast existing home sales at 5.64 million for the year, up 3.5% over 2016. The chief economist at a major insurance firm sees sales rising thanks to "solid job gains, faster wage growth, still low, albeit rising, mortgage rates, and faster household formations."

BUSINESS TIP OF THE WEEK... To stop people from taking up your time by rambling, politely help them get to the point. Don't start a call with "How;s it going?"  Say "What's up?" or "I'm in the middle of getting something out, but what's happening?"

>> Review of Last Week

ON WALL STREET, TRUMP TRUMPS THEM ALL... The week featured some better than expected economic data, plus a bit of a recovery in oil prices, whose decline had troubled investors earlier this month. On Friday, oil prices did head south a tad, dragging some stocks along with theear.

The week's good economic data featured a sharp rebound in Durable Goods Orders, up 4.9% in January following their drop in December. Initial Unempl
ike.

The week ended with the Dow UP 1.9%, to 20941; the S&P 500 UP 1.5%, to 2384; and the Nasdaq UP 2.3%, to 6048.

Bond prices overall ended a tick down for the week, suffering from the good feelings driving up equities. The 30YR FNMA 4.0% bond we watch finished the week down .03, at $105.30. For the week ending April 27, Freddie Mac's Primary Mortgage Market Survey reported national average 30-year fixed mortgage rates rising ever so slightly for the first time in five weeks. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?... A property database reports home sellers in Q1 got a 24% return on their purchase price, an average gain of $44,000. This was the highest average price gain in both percent return and dollars since Q3 of 2007! 

>> This Week’s Forecast

CONSUMERS SPEND, JOBS AND FACTORIES GROW, INFLATION AND RATES HOLD... The economic data flow will be heavy this week. Key reads will be Personal Spending, predicted up a bit, the expected growth in Nonfarm Payrolls and a nice boost in Hourly Earnings. The ISM Index should also stay in growth territory, solidly above 50, while the Core PCE Prices inflation measure should come in flat. Also flat is the forecast for the FOMC Rate Decision, thank you very much, Fed governors.

>> 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 May 1 – May 5

 Date Time (ET) Release For Consensus Prior Impact
M
May 1
08:30 Personal Income Mar 0.3%
0.4% Moderate
M
May 1
08:30 Personal Spending Mar 0.1%
0.1% HIGH
M
May 1
08:30 Core PCE Prices
Mar 0.0%
0.2% HIGH
M
May 1
10:00 ISM Index Apr 56.5 57,2 HIGH
W
May 3
10:00 ISM Services Apr 55.8 55,2 Moderate
W
May 3
10:30 Crude Inventories 4/29 NA -3.64M Moderate
W
May 3
14:00 FOMC Rate Decision 5/3
0.75%-1.0% 0.75%-1.0% HIGH
Th
May 4
08:30 Initial Unemployment Claims 4/29 246K 257K Moderate
Th
May 4
08:30 Continuing Unemployment Claims 4/22 NA 1.988M Moderate
Th
May 4
08:30 Trade Balance Mar -$44.4B -$43.6B Moderate
Th
May 4
08:30 Productivity - Prelim. Q1 0.1%
1.3% Moderate
Th
May 4
08:30 Unit Labor Costs-Rev. Q1 2.6% 1.7% Moderate
F
May 5
08:30 Average Workweek Apr 34.4
34.3 HIGH
F
May 5
08:30 Hourly Earnings Apr 0.3% 0.2% HIGH
F
May 5
08:30 Nonfarm Payrolls Apr 180K 98K HIGH
F
May 5
08:30 Unemployment Rate Apr 4.6% 4.5% HIGH
                                                                                                          

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... Few observers expect a rate hike at this week's FOMC meeting, but the markets are figuring we'll see a quarter percent gain come June. Note: In the lower chart, a 5% probability of change is a 95% certainty the rate will stay the same.

Current Fed Funds Rate: 0.75%-1.0%

After FOMC meeting on: Consensus
May 3 0.75%-1.0%
Jun 14 1.0%-1.25%
Jul 26 1.0%-1.25% 

Probability of change from current policy:

After FOMC meeting on: Consensus
May 3         5%
Jun 14       67%
Jul 26       71%