Stock markets almost unchanged this week - After 4 weeks of solid gains, stocks held steady in a holiday shortened week. Stocks were down until Friday when they rallied as news of a deal to end the government shutdown was eminent. The strength of the stock market lies in investors’ confidence in strong employment and corporate earnings. Last week initial unemployment claims dropped below 200,000 for the first time since 1969. With about two thirds of the economy fueled by consumer spending, a decades low unemployment rate and higher wages are a positive sign. About 25% of companies have reported fourth quarter earnings. Profits are up about 13%. Analysts expect profits to rise 6% in 2019, down from double digit gains in 2018. Considering that 2018 profits were boosted by the corporate tax cut that was not in effect in 2017, a 6% increase was considered a healthy number. Stock markets have now made up about 13% of their losses from their lows on December 24. The Dow has gained 2,900 points since December 24. Weakness in the market includes investors’ fears of increased and prolonged tariffs and a trade war with China. President Trump and China agreed to take a “pause” while they try to negotiate a deal in late December. That has had a positive effect and has fueled a rebound in US stock markets. Economic growth overseas also has investors cautious. China’s economic growth has slowed to the lowest levels since their expansion began in 1990. Europe has shown signs of slowing in their economies. The UK is also facing both economic and political uncertainty as they struggle to leave the European Union. The Dow Jones Industrial Average closed the week at 24,737.20 up 0.1% from 24,706.35 last week. It’s up 6% in January. The S&P 500 closed the week at 2,664.76, down 0.2% from 2,670.71 last week. It is up 6.3% in January. The NASDAQ closed the week at 7,164.86, up 0.1% from 7,157.23 last week. The NASDAQ is up 8% this month.
Treasury Bond Yields almost unchanged this week - The 10-year treasury bond closed the week yielding 2.76%, down slightly from 2.79% last week. The 30-year treasury bond yield ended the week at 3.06%, slightly down from 3.09% last week. We watch treasury bond yields because mortgage rates follow bond yields.
Mortgage rates unchanged this week - Rates at the lowest levels in 9 months - The January 24, 2019 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.45%, unchanged from 4.45% last week. The 15-year fixed was 3.88%, unchanged from 3.88% last week. The 5-year ARM was 3.90%, up slightly from 3.87% last week.
Stocks higher for the fourth consecutive week - Stock markets gained about 3% this week. It marked the longest string of weekly gains since August 2018. Companies that reported fourth quarter earnings came in better than expected. China also made comments signaling that they would work to take steps to lower its trade imbalance with The U.S., which encouraged investors that a trade deal was getting closer. Stocks have now made up almost 1/2 of their losses since hitting an all time highs in September 2018. The Dow Jones Industrial Average closed the week at 24,706.35, up 3.0% from 23,995.95 last week. It’s up 5.9% in January. The S&P 500 closed the week at 2,670.71, up 2.9% from 2,596.48 last week. It is up 6.5% in January. The NASDAQ closed the week at 7,157.23, up 2.7% from 6,971.48 last week. The NASDAQ is up 7.9% this month.
Treasury Bond Yields up slightly this week - The 10-year treasury bond closed the week yielding 2.79%, up from 2.71% last week. The 30-year treasury bond yield ended the week at 3.09%, up from 3.04% last week. We watch treasury bond yields because mortgage rates follow bond yields.
Mortgage rates stable this week at the lowest levels in 9 months - The January 17, 2019 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.45%, unchanged from 4.55% last week. The 15-year fixed was 3.88%, unchanged from 3.89% last week. The 5-year ARM was 3.87%, up slightly from 3.83% last week.
December California existing home sales report - The California Association of Realtors reported that existing home sales totaled 372,260 in December on a seasonally adjusted annualized basis. That was down 2.4% from November and down 11.6% from last December. It marked the fewest sales in a month since January 2015. The statewide median price was $557,600, up 1.4% from December 2017. On a regional basis Los Angles County’s median price of $588,140 was up 1.8% from last December. Orange County had a median price of $785,000 , down 0.1% from December 2017. Ventura County’s median price of $640,000 was down 0.8% from last December. Inventory levels also continued to rise. The unsold inventory index was a 3.5 month supply of homes listed in California, up from 2.5 months in December 2017. Los Angeles Country had a 3.5 month supply, up from a 2.4 month supply last December. Orange County had a 4 month supply, down from 2.6 months last December. Ventura County had a 5.5 month supply, up from a 4 month supply in December 2017.
Job growth surges in December - 312,000 new jobs added - The Bureau of Labor Statistics reported that U.S. employer’s added 312,000 new jobs in December. That shocked analysts that had forecasted 178,000 new jobs.There were 2.6 million jobs added in 2018, up from 2.2 million new jobs in 2017. The unemployment rate rose to 3.9% from 3.7% in November, a 50 year low, as 419,000 new workers entered the workforce. Optimism about finding an acceptable job and higher wages were credited with expanding the workforce. Wages rose 3.2% from one year earlier, matching October’s year over wage gains which marked the largest year over year wage gain since April 2009.
Stocks closed higher for the second straight week - Stocks were down for the week before surging on Friday following a stellar jobs report and positive comments from Federal Reserve Chief Jerome Powell to end the week higher. The jobs report calmed investors fears that a recession may be looming. Comments by Fed chief Powell that interest rate increases would be paused due to low inflation and slowing economies overseas gave investors more good news. Thursday Apple lowered their profit estimates for 2019 based on slower sales. Asia and Europe reported slowing in economic growth which dragged down stocks. Friday the Dow gained 750 points to end the week higher. The Dow Jones Industrial Average closed the week at 23,433.16, up 1.6% from 23,062.49 last week. The S&P 500 closed the week at 2,531.94, up 1.9% from 2,485.74 last week. The NASDAQ closed the week at 6,738.96, up 2.3% from 6,584.62 last week.
Treasury Bond Yields slightly lower - The 10-year treasury bond closed the week yielding 2.67%, down from 2.72% last week. The 30-year treasury bond yield ended the week at 2.98%, down from 3.04% last week. We watch treasury bond yields because mortgage rates follow bond yields.
Mortgage rates at the lowest levels in 8 months - The January 3, 2019 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.51%, down from 4.55% last week. The 15-year fixed was 3.99%, down from 4.01% last week. The 5-year ARM was 3.98% , almost unchanged from 4.00% last week.
The year end email and postcards will be ready once final housing numbers are released. That should be around the 17th of January. Here is some preliminary numbers we have so far.
2018 year end economic update
The Dow Jones Industrial Average ended 2108 at 23,327.46, down from 24,719.22 at the close of 2017. The S&P 500 closed the year at 2,506.85, down from 2,673.51 at the end of 2017. The NASDAQ closed at 6,635.28, down from 6,903.39 on December 31, 2017.
U.S. Treasury Bond Yields higher in 2018 - The 10-year U.S. treasury bond closed the year at a 2.69% yield, up from 2.40% December 31, 2017. The 30-year treasury yield ended the year at 3.02%, up from 2.74% on Dec. 31, 2017.
Mortgage Rates higher in 2018 - The December 28, 2017 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.55%, up from 3.99% on December 29, 2017. The 30-year fixed rate was over 5% in October before declining in November and December. The 15 year fixed was 4.01%, up from 3.44% last December. The 5-year ARM was 4.00%, up from 3.55% at the close of 2017.