June 1st, 2018
Instructions on how to read this blog: Below is the news for the month when it happened and the market’s reaction. For a full view of the month start at the bottom and work your way up. If want to know what just happened start at the top. All Times are Eastern Standard Time. When the price of Mortgage Backed Securities (MBS) goes down rates go up, and when the price goes up rates come down. Remember in the bond market Bad News is Usually Good News and Good News is Usually Bad news. Views You Can Use updated monthly: http://www.mmgweekly.com/m/index.html?SID=78421a2e0e1168e5cd1b7a8d23773ce6
Newsletter updated weekly: http://www.mmgweekly.com/w/index.html?SID=fa7518562603d5c4a7ad69e2e5726f5f
Friday - June 29
Late Morning Review:
Inflation pressures remained contained in May, which is a big topic for the members of the Federal Reserve. The annual Core Personal Consumption Expenditures (PCE), the Fed's favorite inflation gauge, rose to 2% last month, right at the Fed's target range of 2%. It was the first time since April 2012 that the Core PCE hit 2%. The Fed said that its inflation gauge could rise above the 2% target given the upward movement of oil prices.
Consumer Sentiment edged lower in the second half of June due in part to concerns over the potential impact of tariffs on the U.S. economy. However, the decline was minor as the index has been virtually unchanged for the past three months. The final Consumer Sentiment Index for June came in at 98.2, just above the 98.0 reading in May. Looking ahead, consumers anticipate that the economy will produce small additional declines in the unemployment rate as well as higher wage gains.
Thursday - June 28
Not much movement again today for Mortgage Bonds as Stocks rebounded as the seesaw trading pattern continues in the equity markets. The Bond closed near unchanged at 101.94. Tech shares led Stocks higher today. The Dow gained 98.46 points to 24,216.05, the S&P 500 gained 16.68 points to 2,716.31 while the tech heavy NASDAQ closed at 7,503.68 up 58.59 points. WTI oil settled $73.45/barrel, +$0.69. 10-yr Note yield edged higher to close at 2.84%. Tomorrow's economic data includes Personal Income and Spending, Consumer Sentiment, Chicago PMI and the Fed's favorite inflation gauge ... the Core PCE.
Late Morning Review:
Mortgage rates declined over the past week and have now decreased in four of the past five weeks. Rates hit their high water mark at the end of May due in part to an improving economy and modestly higher inflation pressures. Freddie Mac reports that the 30-year fixed-rate mortgage fell to 4.55% this week with an average 0.5 in points and fees. Freddie Mac said that the economy and housing market overall are on solid footing this summer, which should support continued strength in housing demand.
A new survey conducted by Chase Home Lending and Pulsenomics show record highs among U.S. homeowners and renters in three key areas; market conditions, aspirations for homeownership and expectations regarding home values and affordability. The Chase Housing Confidence Index (HCI) systematically measures and tracks key dimensions of consumer confidence in housing markets across the United States using data collected in the U.S. The survey revealed that both homeowners and renters agree that now is a good time to buy and sell a home. The Chase Housing Confidence Index hit 66.3 for the national average with levels above 50 being positive.
Americans filing for first time unemployment benefits continue to hover near lows seen in the early 1970s, as the labor market is now at or near full employment. Weekly Initial Jobless Claims rose 9,000 in the latest week to 227,000. The less volatile four-week moving average of claims, which irons out seasonal abnormalities, edged higher to 222,000 from 221,000. The June Jobs Report will be released Friday, July 6.
Wednesday - June 27
The three major Stock indexes, Dow/S&P/NASDAQ, hopped aboard the roller coaster today as early morning strength fizzled out by mid-afternoon. Stocks were led lower by tech and financial shares, trade jitters. Mortgage Bond prices were able to rise, but bigger gains were seen in the Treasury markets. The Bond rose 12bp to 101.97. The Dow fell by 165.52 points to 24,117.59, the S&P 500 fell by 23.43 points to 2,699.63 while the NASDAQ plunged 116.54 points to end the volatile session at 7,445.08. WTI oil gushed higher on supply concerns closing at $72.76/barrel, +$2.23 to its highest level since November 2014. 10-yr yield edged lower to 2.82%. Tomorrow's economic data includes GDP and Weekly Initial Jobless Claims. The Treasury will sell $30B 7-yr Notes, results at 1:00 p.m. ET.
Late Morning Review:
U.S. Stocks are rebounding today on news that the Trump administration will take a softer stance on foreign investments. It was reported that "rather than actively restricting Chinese investment in U.S. technology firms, the White House has decided to rely on the Committee on Foreign Investment in the United States (CFIUS). The CFIUS is a committee within the Treasury Department that's authorized to review transactions that could result in foreign ownership of a U.S. business. This is seen as a less aggressive approach and, therefore, a bullish catalyst for the U.S. equity market."
The Atlanta Federal Reserve Bank model for Gross Domestic Product (GDP), economic growth, in the second quarter of 2018 is expected to surge 4.5%, after the 2.2% recorded in the first quarter of this year. GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. The GDPNow forecast is constructed by aggregating statistical model forecasts of 13 subcomponents that comprise GDP.
The National Association of REALTORS® reports that Pending Homes Sales fell in May from April and have fallen on an annualized basis for the fifth straight month. The Pending Home Sales Index fell 0.5% in May from April, below the gain of 0.8% expected. Lawrence Yun, NAR chief economist, says this year’s spring buying season will go down as one of unmet expectations. “REALTORS® in most of the country continue to describe their markets as highly competitive and fast moving, but without enough new and existing inventory for sale, activity has essentially stalled.”
Tuesday - June 26
Mortgage Bonds ended the uneventful session with meager gains as the Fannie Mae 30-yr 4% coupon tries to break free of stiff resistance at the 50-day Moving Average. The Bond closed at 101.81, +9bp. Stocks closed with modest gains led by the energy and tech sector and as trade worries ease. The Dow rose 30.31 points to 24,283.11, the S&P 500 ended higher by 5.99 points to 2,723.06 while the NASDAQ closed at 7,561.62, +29.62 points. WTI oil settled at $70.53/barrel, +$2.45. 10-yr yield 2.88%. Pending Home Sales and Durable orders will be released tomorrow morning. The Treasury will sell $36B 5-yr Notes tomorrow, results at 1:00 p.m. ET.
Late Morning Review:
A recent survey conducted by RENTCafe shows that 83% of renters are kept away from their ideal locations and jobs due to rising rent costs. Nationally, the average rent charged by buildings in top-rated locations is $1,655 per month, 37% more than the national average rent of $1,211 charged in lower-rated locations. The survey showed that the "ideal location" for most renters is near their job; close to friends or family; or near attractions such as entertainment, dining, shopping or a gym.
Home prices continued their winning ways in April due in part to an improving economy, low home loan rates and a low supply of homes for sale on the market. The S&P CoreLogic Case-Shiller 20-City Home Price Index rose 6.6% from April 2017 to April 2018, slightly lower than the 6.8% expected. From March to April, the 20-City Index was up 0.2% month over month. Seattle, Las Vegas and San Francisco continue to report the highest year-over-year gains among the 20 cities.
Gas prices at the pumps have edged lower in the latest week as motorists head into next week's 4th of July celebration. The national average price for a regular gallon of gas is $2.85, five cents cheaper than a week ago, 12-cents less than a month ago and 58-cents more than a year ago. Motor Club AAA said that prices should edge a bit lower in late summer or early fall.
Monday - June 25
Mortgage Bonds saw little movement in today's trading session as Stocks got battered on trade fears. Strong May New Home Sales could have put a lid on higher Bond prices, but added supply and stiff resistance were most likely the culprits holding Mortgage Bond prices in check. The Fannie Mae 30-yr 4% coupon closed unchanged at 101.72. Stocks fell, but closed off their worst levels. The Dow lost 328.09 points to 24,252.80, the S&P fell by 37.81 points to 2,717.07, while the NASDAQ plunged 160.81 points to end at 7,532.00. WTI oil settled at $68.08/barrel, -$0.50. 10-yr yield 2.88%. Tomorrow's economic data includes S&P Case-Shiller 20-City Home Price Index and Consumer Confidence.
Late Morning Review:
The labor market has improved dramatically since the height of the "Great Recession" back in early 2009. The Unemployment Rate was 3.8% as of May 2018. The "unemployed and underemployed" rate, U6, was 7.6% as of May 2018, which is the combination of jobless individuals plus workers who are part-time purely for economic reasons. The U.S. unemployment rate was 10.0% as of October 2009. The U.S. "unemployed and underemployed" rate was 17.1% as of October 2009.
The Commerce Department reported that New Home Sales rose 6.7% to an annual rate of 689,000 in May from April. This was above the 666,000 expected and, the highest number since November 2017. However, April was revised lower to 646,000 from the original reading of 662,000. From May 2017 to May 2018, sales rose 14.1%. The median sales price of new houses sold in May 2018 was $313,000. There was a 5.2-month supply of new homes for sale on the market, just below 6-months that is seen as normal. New Homes Sales fell in the Northeast and West, rose in the South and were flat in the Midwest.
After declining last week, due in part to lingering trade issues between the U.S. and China, U.S. Stocks are lower to begin the last week of trading for June, the quarter and the first half of 2018. The closely watched S&P 500 is up slightly in 2018 from the last trading day in 2017, while the Dow Jones Industrial Average is down a little over 1% in the same time period. From the last day of trading in 2016 until the last day of trading in 2017, the S&P rose nearly 20%.
Friday - June 22
Mortgage Bonds saw little action today in a low trading volume Friday summer session. The Fannie Mae 30-yr 4% coupon closed unchanged at 101.72. Stocks rose on the heels of higher energy shares, NASDAQ declined. The Dow closed at 24,580.89 up 119.19 points, the S&P 500 closed at 2,754.88, up 5.2 points while the NASDAQ saw a 20.13 point loss to end the week at 7,692.81. WIT oil was last seen at $69.18, +$3.12. 10-yr yield 2.89%. Next week's economic calendar is packed with a broad array of data with the Core PCE in the spotlight. Have a great weekend!
LATE MORNING REVIEW:
Home affordability in the first quarter of 2018 hit its lowest level since the third quarter of 2008 due in part to low inventories of homes for sale on the market along with rising mortgage rates. ATTOM Data Solutions reports that its Home Affordability Index fell to 95 from 102 in the first three months of 2018. Index scores above 100 indicate more affordability, below 100 indicates less affordability.
There are no economic reports due for release today while geopolitical headlines are scarce. With summer officially underway, the Friday summer doldrums look to be setting in causing low volume trading. Looking out to next week, the Treasury will sell a total of $100B in Treasury Notes with $34B 2s on Tuesday, $36B 5s on Wednesday and $30B 7s on Thursday. The added supply could weigh on Bond prices given the auction results.
In addition, economic data ramps up next week as traders, investors and members of the Federal Reserve will receive reports that cover a big chunk of the U.S. economy. The closely watched Core PCE, the Fed's favorite inflation gauge, will be released next week. Inflation talk has been in the news for several months now and this week the Core PCE will be closely watched.
Thursday - June 21
Not much action in the Mortgage Bond markets today as prices traded in a tight range squeaking out minor gains, despite the decline in Stocks. The Fannie Mae 30-yr 4% coupon closed at 101.72, +9bp. Stocks fell as industrial shares declined on the trade issues while online retailers dropped after a U.S. Supreme Court ruling on state sales tax collection. The Dow fell by 196.10 points to 24,461.70, the S&P 500 ended lower by 17.56 points to 2,749.76 while the NASDAQ lost 68.56 points to end at 7,712.95. WTI oil settled at $65.54/barrel, -$0.17. 10-yr yield 2.89%. There are no economic reports scheduled for release tomorrow.
LATE MORNING REVIEW:
Mortgage rates edged lower over the past week and have now declined in three of the past four weeks. After a sharp run-up in the early part of 2018, mortgage rates have stabilized over the last three months, with only a modest uptick since March. Freddie Mac reports that the 30-year fixed-rate mortgage fell five basis points in the latest week to 4.57% with an average 0.50 in points and fees.
Manufacturing activity in the Philadelphia region declined in June from May, though all the broad indicators remained positive. The June Philadelphia Manufacturing Index fell 15 points from May to 19.9 and below the 27 expected. The new orders index and general activity fell notably. Expectations for the next six months continued to moderate but remain positive overall. The survey went on to reveal that firms continued to report overall increases in employment.
The National Association of Manufacturers released the results of the Manufacturers' Outlook Survey for the second quarter of 2018. The survey showed that 95.1% of manufacturers have positive outlooks for their companies, an all-time in the survey’s 20-year history following the enactment of the Tax Cuts and Jobs Act. Within the report it showed all-time highs for projected employment growth and capital spending.
Wednesday - June 20
Mortgage Bond prices edged lower in today's session after failing to rise above key technical levels in the past week. The Fannie Mae 30-yr 4% coupon closed at 101.59, -12bp and at the low for the day. Stocks closed mixed. The Dow lost 42.41 points to 24,657.80, the S&P 500 gained 4.73 points to 2,767.32, while the tech heavy NASDAQ closed at a fresh record high of 7,781.51 led by the FAANG Stocks ... FaceBook, Apple, Amazon, Netflix and Google. WTI oil settled at $66.22/barrel, +$0.84. 10-yr yield has edged higher to 2.94%. The Philly Fed and Weekly Initial Jobless Claims will be released tomorrow morning.
LATE MORNING REVIEW:
The National Association of REALTORS® reported on Wednesday that Existing Home Sales declined for the second straight month in May. Existing Home Sales were down slightly by 0.4% from April to an annual rate of 5.43 million annualized units, below the 5.55 million expected. From May 2017 to May 2018, Existing Home Sales were down 3%. While sales rose in the Northeast in May, they fell in the Midwest, West and South. Inventories of homes for sale on the market remain low with a 4.1-month supply, below the 6 months seen as normal.
Lawrence Yun, the NAR chief economist, said, “Inventory coming on the market during this spring’s buying season was not even close enough to satisfy demand.” A solid economy and job market should be generating a much stronger sales pace than what has been seen so far this year. “Closings were down in a majority of the country last month and declined on an annual basis in each major region,” he said. “Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market.”
Mortgage rates remained unchanged in the latest week, as reported by the Mortgage bankers Association (MBA). The MBA reports that the 30-year fixed-rate conforming mortgage remained at 4.83% (0.48 point), while jumbo rates increased by five basis points to 4.79% (0.36 point), while FHA rates were near unchanged at 4.82% (0.84 point). The refinance index rose 6%, while the purchase index increased 4% from a week earlier.
Tuesday - June 19
Mortgage Bonds closed near unchanged today and we are unimpressed given the slide in the Stock markets. Lingering trade issues pushed Stocks lower today. Strong Housing Starts for May could have capped any gains for Bond prices. The Fannie Mae 30-yr 4% coupon closed at 101.72, near unchanged. The Dow closed at 24,700.21, down 287.26 points, the S&P 500 lost 11.18 points to 2,762.57, while the tech heavy NASDAQ closed at 7,725.58, -11.18 points. WTI oil settled at $65.07/barrel, -$0.78. 10-yr yield 2.88%. Tomorrow's economic data is limited to May Existing Home Sales.
LATE MORNING REVIEW:
The Commerce Department reported on Tuesday that new home construction surged in May to a near 11-year high led by both single- and multi-family dwellings. Housing Starts rose 5% in May from April to an annual rate of 1.350 million units, above the 1.323 million expected. From May 2017 to May 2018, Housing Starts increased a whopping 20.3%. Total Housing Starts fell in the Northeast, South and West, but soared in the Midwest month over month from April to May.
Single-family starts, which accounts for the largest share of the housing market, rose 3.9% from April to May to an annual rate of 936,000 units and were up 18.3% annually. Multi-family dwellings rose 11.3% monthly and jumped 27.4% annually. However, future new construction could ease a bit as Building Permits fell 4.6% monthly after declining in April.
U.S. Stocks are lower once again today as the trade issues between the U.S. and China intensify. On top of the previous tariffs, President Trump is looking to impose tariffs on an additional $200B worth of imports from China. The closely watched Dow Jones Industrial Average was down over 400 points in early trading before somewhat recouping some of those losses. The Dow is now in negative territory for the year.
Monday - June 18
Mortgage Bond began and ended the quiet session near unchanged with little data to impact markets. Political turmoil headlines out of Germany and lingering trade issues pushed Stocks lower to begin the week. The Fannie Mae 30-yr 4% coupon closed at 101.66, near unchanged. The Dow fell by 103.01 points to 24,987.47, the S&P 500 lost 5.79 points to 2,773.87 while the NASDAQ ended near unchanged at 7,747.02. WTI closed at $65.85/barrel, +$0.79. 10-yr yield 2.92%. Tomorrow's economic data includes Housing Starts and Building Permits for May.
LATE MORNING REVIEW:
The monthly collection of jobs data in the United States is a combination of science and art. 60,000 American households are asked to complete employment surveys by the 12th of the month. The employment status of the individuals in those 60,000 households is then extrapolated to project national figures for our country's actual 120 million households, i.e., just 1 out of every 2,000 households provided the data to calculate our country's May 2018 jobless rate of 3.8%.
Renewed trade issues between the U.S. and China coupled with rising political tensions in Germany are pushing U.S. Stocks lower to begin the week. The Dow Jones Industrial Average is down 222 points in early week trading to 24,869. Stocks have come under some pressure in 2018 on trade worries, geoplolitical tensions in Europe, the threat is rising U.S. interst rates along with inflation pressures.
Home builder confidence slipped a bit in June due in part to rising lumber prices though it remains on solid footing. The National Association of Home Builders reports that its Housing market Index fell two points in June to 68, just below the 70 expected. Any number over 50 indicates that more builders view conditions as good than poor. “Builders are optimistic about housing market conditions as consumer demand continues to grow,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La.
Friday - June 15
Mortgage Bonds started the day slightly higher, added to gains, before closing near unchanged levels. Solid economic data and end of week positioning brought some selling as the session wore on. The Fannie Mae 30-yr 4% coupon closed at 101.66, near unchanged and just slightly above last Friday's close after a turbulent week. Stocks ended lower on renewed trade woes with China. The Dow lost 84.83 points to 25,090.48, the S&P closed at 2,779.42 -3.07 points while the tech heavy NASDAQ ended at 7,746.37 down 14.66 points. WTI oil settled at $65.06/barrel, -$1.83. 10-yr yield 2.92%. Next week's economic calendar is on the light side with housing in the spotlight. Have a great weekend!
Late Morning Review:
Renewed tariff woes with China are helping the U.S. Bond markets today while pushing the Dow Jones Industrial Average, S&P 500 and the NASDAQ lower as the week comes to an end. President Trump has approved tariffs on $50 billion worth of Chinese goods imported into the U.S. An official announcement is expected later today. The closely watched Dow Jones Industrial Average was down nearly 300 points in early trading.
The Federal Reserve raised its benchmark short-term Fed Funds Rate this week, but what does that actually equate to for the U.S. consumer? The consumer will see a hike on rates for credit cards, home equity lines of credit, auto loans and other adjustable-rate instruments. In addition, student loan rates will creep higher while savings rates for banks will edge higher, but not by much.
Fannie Mae reported this week that mortgage lenders reported a net-negative profit margin outlook for the seventh consecutive quarter due in part to rising home prices and a tight supply of home for sale on the market. Tight supplies continue to put a squeeze on mortgage demand. "Lenders remain bearish this quarter as they continue to face headwinds from rising mortgage rates, tight supply, and strong home price appreciation, which have drastically reduced refinance activity and restrained home purchase affordability," said Doug Duncan, senior vice president and chief economist at Fannie Mae.
Thursday - June 14
Late Morning Review:
Recent tax cuts and a strong labor market sent consumers on a spending spree in May as Americans doled out their hard-earned cash at gas stations, clothing stores and home improvement centers. May Retail Sales surged 0.8 percent from April, well above the 0.4 percent expected. From May 2017 to May 2018, Retail Sales were up 5.9 percent.
When stripping out autos, Retail Sales jumped 0.9 percent versus the 0.5 percent expected. Overall, it was a strong report. If consumers continue to spend, the U.S. economy will continue to grow at a solid pace in the months ahead. The Retail Sales report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation.
Mortgage rates edged higher in the latest week but looking at rates from a historic perspective, they are still relatively low. Freddie Mac reports that the 30-year fixed-rate mortgage rose eight basis points to 4.62% in the latest week with an average 0.40 in points and fees. Freddie Mac says the good news is that the impact of rising rates on consumer budgets will be smaller than past rate hike cycles. That is because a much smaller segment of mortgage loans in today’s market are pegged to short-term rate movements.
Wednesday - June 13
As expected, the Fed raised its benchmark Fed Funds Rate in today's interest rate decision and said the economy is doing very well. The Fed now forecasts a total of four rate hikes in 2018 from the previous forecasted three hikes. The headlines initially sent Mortgage Bonds off their highs and fell well into negative territory before rebounding to near unchanged levels. The Fannie Mae 30-yr 4% coupon traded as high as 101.56 before the statement release, bottomed out at 101.19 and closed at 101.47, near unchanged. Stocks closed lower after the Fed signaled two more rate hikes this year. The Dow lost 119.53 points to 25,201.20, the S&P fell by 11.22 points to 2,775.63, while the NASDAQ closed at 7,695.69, down 8.09 points. WTI oil closed at $66.64/barrel, +$0.28. 10-yr yield 2.97% after hitting 3.01% soon after the Fed statement was released. Economic data tomorrow includes retail Sales and Weekly Initial Jobless Claims.
Late Morning Review:
Higher oil prices led wholesale prices higher in May as inflation pressures begin to build. The Producer Price Index (PPI) surged 0.5% in May from April, above the 0.3% rise expected. On an annual basis PPI jumped 3.1% from 2.6% in April and was the largest increase since January 2012. The Core PPI, which strips out volatile food and energy, rose 0.2% month over month and 2.6% annually.
It's Fed day! The Federal Reserve is expected to raise the short-term Fed Funds Rate by 0.25% to bring it to the 1.75%-2% level. The announcement will be made at 2:00 p.m. ET this afternoon. The hike is most likely baked into the cake and shouldn't stir up the markets in a big way. However, what is revealed in the statement, economic projections and Fed Chair Powell's news conference, could shake things up.
The Mortgage Bankers Association (MBA) reports that home loan rates edged higher in the latest week but remain historically low. The MBA reports that the 30-year fixed-rate conforming mortgage rose to 4.83% from 4.75% with points increasing to 0.53 from 0.46 for the week ending June 8, 2018. In addition, the MBA's Market Composite Index, a measure of total mortgage loan application volume, fell 1.5% from the previous week. The purchase and refinance indexes both fell 1.5%.
Tuesday - June 12
Not much action for Stocks and Bonds today as both asset classes closed near unchanged levels ahead of the Fed's interest rate decision tomorrow. Year-over-year consumer inflation heated up a bit while the monthly numbers were rather subdued. The Fannie Mae 30-yr 4% coupon closed at 101.47, near unchanged. The Dow closed near unchanged at 25,320.73, the S&P saw a gain of 4.85 points to 2,786.85 while the NASDAQ rose 43.86 points to end at 7,703.79. WTI oil closed at $66.36, +$0.26. 10-yr yield 2.96%. Wholesale inflation (PPI) will be released tomorrow. The big event will be the 2:00 p.m. ET release of the Fed's interest rate decision and monetary policy statement. Be sure to read tomorrow morning's Daily Market Update to get our latest stance before 2:00.
Late Morning Review
Small business optimism continued to reach new heights in May due in part to tax cuts and less regulations. The NFIB Small Business Optimism Index rose to 107.8 in May, the second highest reading in the survey's 45-year history. "Main Street optimism is on a stratospheric trajectory thanks to recent tax cuts and regulatory changes. For years, owners have continuously signaled that when taxes and regulations ease, earnings and employee compensation increase," said NFIB President and CEO Juanita Duggan.
Consumer inflation was somewhat tame month over month while annual increases were a bit hotter than expected. The headline Consumer Price Index (CPI) rose 0.2% in May, just below the 0.3% expected as increases in gasoline slowed a bit during the month. However, year-over-year CPI increased 2.8%, the biggest increase since February 2012, up from 2.5% in April. The Core CPI, which strips out volatile food and energy, rose 0.2% from April and was up 2.2% annually. The Fed's preferred inflation gauge, the annual Core Personal Consumption Expenditure, rose 1.8% in April, just below the Fed's target range of 2%.
Mortgage delinquency rates edged lower in March due in part to an improving economy and labor market. CoreLogic reports that the 30 days or more delinquency rate for March 2018 was 4.3%. In March 2017, 4.4% of mortgages were delinquent by at least 30 days or more including those in foreclosure. This represents a 0.1%-point decline in the overall delinquency rate compared with March 2017.
Monday - June 11
Not much action in the U.S. capital markets today ahead of the risk event filled week. Stock and Bond prices closed near unchanged. There were no economic reports today. The two decent Treasury offerings today supported Bond prices but not strong enough to spark a rally. The Fannie Mae 30-yr 4% coupon closed at 101.59, unchanged. The Dow gained 5.78 points to 25,322.31, the S&P 500 closed at 2,782.00, up 2.97 points while the NASDAQ squeaked out a 14.41 point gain to end at 7,659.92. WTI oil closed at $66.10/barrel, +$0.36. 10-yr yield 2.95%. Inflation data from the Consumer Price Index will be released tomorrow. The 2-day Fed meeting kicks off tomorrow on Capitol Hill but there will be no headlines until Wednesday afternoon. The Treasury will sell $14B 30-yr Bonds tomorrow, results at 1:00 p.m. ET.
Late Morning Review:
The Federal Open Market Committee meeting kicks off on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement and interest rate decision. The Fed is expected to raise the Fed Funds Rate by 0.25% to bring the benchmark rate to 2%. The hike is already baked into the cake but the accompanying statement, economic projections and Fed Chair Powell's press conference immediately following the release could impact the markets. There will be no headlines until Wednesday.
The housing market continues to produce positive headlines for consumers. Property data collector CoreLogic reports that homeowner equity surged by $1 trillion in Q1 2018 from Q1 2017, an annual increase of 13.3%. In addition, homeowner equity has doubled in the past five years, rising by $4.4 trillion from Q1 2013 to Q1 2018. Over the past 12 months, 640,000 borrowers moved into positive equity.
Tonight at 9:00 p.m. ET President Trump will meet North Korean leader Kim Jong Un with the goal being "the complete, and verifiable, and irreversible denuclearization of the Korean Peninsula." Ahead of the summit, U.S. Stocks are modestly higher. This week's events will have an impact on Stock and Bond prices as well as home loan rates.
Friday - June 8
Not much action in the markets today as the summer doldrums set in for a Friday. The Fannie Mae 30-yr 4% coupon closed at 101.56, -16bp. Stocks closed higher as trade issues ease. The Dow closed higher by 75.12 points to 25,316.53, the S&P 500 closed up 8.66 points to 2,779.03, while the NASDAQ ended at 7,645.51, +10.44 points. WTI oil ended at $65.74/barrel, -$0.21. 10-yr yield 2.94%. Next week we have the 2-day Fed meeting ending Wednesday with the release of a policy change and the statement. It is expected that the short-term Fed Funds Rate will rise by 0.25%. Consumer and wholesale inflation will be released. The Treasury will sell a total of $68B in 3- and 10-yr Notes along with 30-yr Bonds. Have a great weekend!
Late Morning Review:
Housing sentiment continued to strengthen in May, but high home prices complicate consumer purchase confidence, reports Fannie Mae. Higher home prices are due in part to limited inventories of homes for sales on many markets across the nation. The Fannie Mae Home Purchase Sentiment Index (HPSI) rose 0.6 points in May to 92.3, reaching a new all-time survey high for the second consecutive month. The net share of respondents who reported that now is a good time to sell a home increased to 46% in May, and is now up 14 percentage points year over year. However, the net share of those surveyed said now is a good time to buy, decreased to 28%, showing little improvement in the past 12 months.
Not much action in the U.S. capital markets today as the investing world sits on their hands awaiting next week's Fed decision and monetary policy statement. Currently, there is a 90% chance of a 0.25% hike to short-term Fed Funds Rate. The Federal Open Market Committee meeting begins Tuesday and ends Wednesday at 2:00 p.m. ET with the rate announcement and statement. The Fed will also release economic projections while Fed Chair Powell will hold a press conference at 2:30 p.m. ET.
Thursday - June 7
Mortgage Bonds were able to rise today as bargain hunters jumped in after the recent decline. The Fannie Mae 30-yr 4% coupon closed at 101.72, +16bp, closing above resistance one at the 25-DMA. Stocks closed mixed as tech shares weighed on the S&P and NASDAQ. The Dow gained 95.02 points to 25,241.41, the S&P closed lower by 1.98 points to 2,770.37 while the NASDAQ fell by 54.17 points to end at 7,635.07. WTI oil closed at $65.95/barrel, +$1.22. 10-yr yield 2.92%. There are no economic reports due for release tomorrow.
Late Morning Review:
Americans filing for first-time unemployment claims continue to hover near lows seen in the early 1970's as the labor market is now near full employment. Weekly Initial Jobless Claims fell 1,000 to 222,000 and have remained below the 300,000 mark for 170 weeks, a sign of strength in the sector. The four-week moving average of initial claims, which irons out seasonal abnormalities, rose 2,750 to 225,500 last week.
Mortgage rates edged lower this week and remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage fell two basis points to 4.54% with an average 0.50 in points and fees. Freddie Mac says that while the very healthy job market continues to fuel interest in buying a home, the supply shortages in most markets are pushing prices higher and currently keeping sales at a standstill.
Gas prices at the pumps were unchanged this week but have been pushing higher as the spring and summer driving season is underway. Motor club AAA reports that the national average price for a regular gallon of gasoline is at $2.94, up from $2.81 a month ago and up from $2.36 a year ago. “Nearly 80% of Americans say the price of gasoline is too high at $3 per gallon.” said Jeanette Casselano, AAA gas price expert. “Crude oil prices are falling, but it likely won’t be enough to drop gas prices more significantly this summer.”
Wednesday - June 6
Talk of higher inflation and discussion of ending stimulus in the Eurozone weighed on Bond prices in today's session while pushing yields higher. The Fannie Mae 30-yr 4% coupon closed at 101.56, -22bp and at the low for the day. Stocks surged on easing trade issues. The NASDAQ closed at a fresh record high of 7,698.24, +51.38 points, the Dow jumped 346.41 points to 25,146.39, while the closely watched S&P gained 23.55 points to end the bullish trading day at 2,772.25. WTI oil edged lower to $64.73/barrel, -$0.79 on higher supply worries. 10-yr yield closed at 2.97%. Economic data tomorrow is limited to Weekly Initial Jobless Claims and nothing scheduled for Friday.
Late Morning Review:
Mortgage rates declined in the latest which sparked a jump in mortgage applications, reports the Mortgage Bankers Association (MBA). The MBA reports that its Market Composite Index, a measure of total mortgage loan application volume, rose 4.1% in the latest week. The refinance index rose 4%, while the purchase index increased 4% from the previous week. The 30-year fixed-rate conforming mortgage fell to 4.75% from 4.84% with an average 0.46 in points. Mortgage rates have been on the rise in 2018, but from an historical basis, they remain just above all-time lows.
Just some numbers from the recent Census Bureau report on homeownership rates: The homeownership rate of 64.2% in the first quarter of 2018 was not statistically different from the rate in the first quarter of 2017 (63.6%) and virtually unchanged from the rate in the fourth quarter 2017 (64.2). National vacancy rates in the first quarter 2018 were 7% for rental housing and 1.5% for homeowner housing. The rental vacancy rate of 7% was virtually unchanged from the rate in the first quarter 2017 (7%) and not statistically different from the rate in the fourth quarter 2017 (6.9%).
Tuesday - June 5
Not a lot of action in the markets today in the absence of any market moving news or geoploitical headlines. After the recent slide, Mortgage Bonds closed slightly higher from yesterday. The Fannie Mae 30-yr 4% cou[pon closed at 101.78, +6bp. Stocks closed mixed and left the NASDAQ at a record high close of 7,637.86, +31.40 points. The Dow fell by 13.71 points to 24,799.98 while the S&P saw a meager 1.93 point gain ending at 2,748.80. WTI oil closed at $65.52/barrel, +$0.77. 10-yr yield 2.92%. There are no major economic reports due for release tomorrow.
Late Morning Review:
Limited inventories of homes for sale on the market continue to push home prices higher as “new construction fails to keep up with and meet new housing growth or replace existing inventory,” according to CoreLogic Chief Economist Frank Nothaft. CoreLogic reports that home prices, including distressed sales, rose 6.9% from April 2017 to April 2018, while there was a 1.2% gain in April 2018 compared with March 2018. Looking ahead, CoreLogic forecasts a 5.3% increase in home prices from April 2018 to April 2019. Nothaft says, “More construction of for-sale and rental housing will alleviate housing cost pressures.”
The job market continues to strengthen with many employers reporting that it is getting tougher and tougher to fill openings. The Labor Department reported that its JOLTS (Job Opening and Labor Turnover Survey) report showed there were 6.7 million job openings in April from 6.6 million in March. The 6.7 million is the highest recorded since the government began the survey back in December 2000. At this point in time, the job market is considered to be at or near full employment.
The service sector of the economy grew in May for the 100th consecutive month. The ISM Service Index rose to 58.6 in May from the 56.8 recorded in April and above the 58.0 expected. Within the report it showed that the employment component rose in May as well as other key sectors. The report went on to say that the majority of respondents are optimistic about business conditions and the overall economy. There continue to be concerns about the uncertainty surrounding tariffs, trade agreements and the impact on cost of goods sold.
Monday - June 4
The trading week kicked off with lower Bond prices, higher yields and higher Stock prices. Stocks were boosted in the absence any of any glaring geopolitical headlines and after the solid Jobs report on Friday. The Fannie Mae 30-yr 4% coupon closed at 101.72, -22bp. The Dow gained 178.48 points to 24,813.69, the S&P 500 was up 12.25 points to 2,746.87, while the tech heavy NASDAQ gained 52.12 points to end the day at 7,606.46. WTI oil closed at $64.75/barrel, -$1.06 on supply concerns. 10-yr yield rose to 2.94%. Economic data is limited to the ISM Service Index.
Late Morning Review:
The National Association for Business Economics (NABE) feels the Tax Cut & Jobs Act will boost economic growth in 2018 and 2019, but the U.S. could fall into a new recession in 2020. NABE expects 2.8% Gross Domestic Product this year, slightly lower from its 2.9% reported in March. The slightly less optimistic view is due in part to the trade policies that could have a negative impact on the economy. The current economic expansion began in mid-2009 and is currently the second longest in U.S. history and will be the longest if it continues past June 2019.
There were no U.S. bank failures during the first five months of 2018, the first time this has occurred since 2006. Ultimately, there were no bank failures in 2006, the last calendar year when that happened. Since 2007, 531 banks have failed, an average of 48 per year over the last 11 years.
The two-day Federal Open Market Committee (FOMC) meeting will kick off its regularly scheduled meeting next week, June 12-13. It is expected that the meeting will end on Wednesday with a quarter-point hike in the short-term Fed Funds Rate (FFR). The Fed Funds Rate is the rate at which depository institutions lend reserves held at the Federal Reserve to other depository institutions overnight. The FFR influences everything from home and auto loans to credit cards along with lenders' Prime Rates.
Friday - June 1
Easing political tensions in Europe and a strong Jobs Report for May sent Bond prices lower today, yields higher, Stocks higher as the seesaw action continued in Stocks and Bonds. The Fannie Mae 30-yr 4% coupon closed at 101.94, -12bp. The Dow gained 219.37 points to 24,635.21, the S&P closed at 2,734.62, +29.35 points while the tech heavy NASDAQ ended the week at 7,554.33, up 112.21. WTI oil closed at $65.81/barrel, -$1.23. 10-yr yield 2.90%. Late in the day President Trump said the summit with North Korea is back on for June 12. Next week's economic is on the light side. Have a great weekend!
Late Morning Review:
Strong job growth continued in May as the U.S. economic expansion continues its winning ways. The Bureau of Labor Statistics reports that Non-Farm Payrolls rose 223,000 in May, above the 190,000 expected and up from 159,000 in April. For the past three months, job gains averaged 179,000. April and March were revised for an increased total of 15,000. The Unemployment Rate for May fell to 3.8%, the lowest since April 2000.
May Average Hourly Earnings increased 0.3%, in line with estimates and up from 0.1 percent in April; year-over-year was reported at 2.7%, up from 2.6% in April. Total unemployment, or the U6 number, fell to 7.6% in May from 7.8% in April. The Labor Force Participation Rate was at 62.7% for May from 62.8 percent the previous month. Overall, the Jobs Report was strong and shows a tightening labor market.