U.S. Economy slowed in second quarter - The Commerce Department reported that the Gross Domestic Product, the broadest measure of goods and services produced, rose at a 2.1% annual rate in the second quarter. That was down significantly from 3.1% in the first quarter, but above some analysts expectations who forecasted that tariffs and trade concerns may drag the GDP to as low as a 1.8% annual increase in Q2. Investors who are awaiting a possible rate cut from the Federal Reserve actually pushed up stock prices, as this report increases the likelihood of a rate cut to stimulate the economy.
Stocks higher this week - Although the second quarter GDP dropped a full percentage point to a 2.1% annual growth rate in the second quarter, down from a 3.1% growth rate in the first quarter, stocks gained ground. That was because investors feel slower growth increases the likelihood of a rate cut by the Fed, which will reduce borrowing costs to companies. Companies reporting corporate earnings have been strong in early reporting. Consumer spending also increased 4.3% in the second quarter which is very strong. The Dow Jones Industrial Average closed the week at 27,192.45, up 0.1% from 27,154.20 last week. It’s up 16.4% year to date. The S&P 500 closed the week at 3,025.86, up 1.7% from 2,976.61 last week. It is up 20.7% year to date. The NASDAQ closed the week at 8,33.21, up 2.3% from 8,146.49 last week. The NASDAQ is up 25.5% year to date. Treasury Bond Yields - Bond yields dropped this week. The 10-year treasury bond closed the week yielding 2.08%, almost unchanged from 2.05% last week. The 30-year treasury bond yield ended the week at 2.59%, unchanged from 2.57% last week. We watch treasury bond yields because mortgage rates often follow bond yields. Mortgage rates lower this week - The July 25, 2019 Freddie Mac Primary Mortgage Survey showed mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 3.75%, down from 3.81% last week. The 15-year fixed was 3.18%, down from 3.23% last week. The 5-year ARM was 3.47%, almost unchanged from 3.48% last week. U.S. existing home sales numbers decline in June, as prices continue to rise - The National Association of Realtors reported that total existing home sales which includes closed sales of single family homes, condominiums, townhomes, and co-opsdropped 1.7% month over month in June from May, to a seasonally adjusted annual rate of 5.27 million sales in June. That is down 2.2% from 5.39 million annual sales rate last June. The median price paid for a home was 4.3% higher than one year ago. That marked the 88th straight month of year over year increases in the median price. The unsold inventory index stood at a 4.4 month supply of homes for sale, up slightly from a 4.3 month supply one year ago. Author, Syd Leibovitch
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Stock markets ended the week lower - Investors took profits as stocks dropped from last week’s record high levels. Analysts have mixed expectations as they await the start of second quarter earnings results. Those should drive the markets in the coming weeks. The Dow Jones Industrial Average closed the week at 27,154.20, down 0.7% from 27,332.03 last week. It’s up 16.4% year to date. The S&P 500 closed the week at 2,976.61, down 1.2% from 3,013.77 last week. It is up 18.7% year to date. The NASDAQ closed the week at 8,146.49, down 1.2% from 8,244.17 last week. The NASDAQ is up 22.8% year to date.
Treasury Bond Yields - Bond yields dropped this week. The 10-year treasury bond closed the week yielding 2.05%, down from 2.12% last week. The 30-year treasury bond yield ended the week at 2.57%, down from 2.64% last week. We watch treasury bond yields because mortgage rates often follow bond yields. Mortgage rates slightly higher this week - The July 18, 2019 Freddie Mac Primary Mortgage Survey showed mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 3.81%, up slightly from 3.75% last week. The 15-year fixed was 3.23%, unchanged from 3.22% last week. The 5-year ARM was 3.48%, almost unchanged from 3.46% last week. June California existing home sales report - The California Association of Realtors reported that existing single family homes sales totaled 389,690 on a seasonally adjusted annualized rate in June. That represented a drop of 4.2% from May and a year over year drop of 5.1% from last June. The statewide median price was $611,420, up 1.4% from June 2018. The unsold inventory index stood at a 3.4 month supply of homes for sale in June, up from a 3.2 month supply in May and a 3.0 months supply one year ago. Year over year results on a regional basis in June were as follows: In Los Angeles County the median price increased 2.2%, as the number of sales fell 12.6%. In Orange County the median price increased .8% as the number of sales fell 7.2%. In Ventura County the median price dropped 4.1%, as the number of sales increased 0.6%. Foreign investment in U.S. residential real estate declined in the year ending March 31,2019. The National Association of Realtors reported that foreign buyers purchased $77.9 billion worth of existing homes from April 2018 to March 2019. That represented a 36% decline from $121 billion from the same time period one year earlier. NAR President, John Smaby stated “Even though the numbers were lower this year than the previous 12 months, international investors and buyers still spent and invested a great deal of money in U.S. real estate.” Foreign buyers also accounted for more cash transactions. All cash transactions accounted for 41% when purchased by a foreign buyer, compared to 21% for all existing home sales within the one year time period. Author, Syd Leibovitch The Dow exceeds 27,000 for the first time ever - This week Federal Reserve Chairman Powell’s testified before Congress. He signaled that an argument could be made for an interest rate cut. This led investors to speculate that a cut was likely in the coming months. The Fed controls overnight rates. Those directly affect prime lending rates. Cuts in these short term rates reduce interest expense to companies and push up corporate earnings. Speculation of a rate cut pushed all indexes up to record highs. Unfortunately, speculation of lower short term rates actually caused mortgage rates to rise this week. Mortgage rates are long term rates. Lower short term rates increase the risk of long term inflation and drives long term rates higher. The Dow Jones Industrial Average closed the week at 27,332.03, up 1.5% from 26,922.12 last week. It’s up 17.2% year to date. The S&P 500 closed the week at 3,013.77, up 0.8% from 2,990.41 last week. It is up 20.2% year to date. The NASDAQ closed the week at 8,244.17, up 1.0% from 8,161.79 last week. The NASDAQ is up 24.2% year to date.
Treasury Bond Yields - The 10-year treasury bond closed the month yielding 2.12%, up from 2.04% last week. The 30-year treasury bond yield ended the week at 2.64%, up from 2.54% last week. Mortgage rates remain at 2 year lows - The July 3, 2019 Freddie Mac Primary Mortgage Survey showed mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 3.75%, almost unchanged from 3.75% last week. The 15-year fixed was 3.22%, up from 3.18% last week. The 5-year ARM was 3.46%, unchanged from 3.45% last week. Rates ended the week higher. They will be about 1/8% higher next week. Homes purchased by investors were the highest on record in 2018 - The share of investor purchases of U.S. homes have climbed to an all-time high, a sign that rising home prices have done little to dampen demand for flipping homes or turning them into single-family rentals. Data released by CoreLogic reported that more than 11% of residential properties were purchased by real estate speculators, private equity firms, and other investors in 2018. Investor purchases are the highest on record and nearly twice the levels before the 2008 housing crash. The investor interest poses a challenge for millennials and other first-time buyers who are increasingly looking to buy starter homes and are forced to compete with deep-pocketed cash buyers. June home sales figures should be released next week. Those will be included in next week’s report. Based on our company sales we expect both the number of sales and prices to be higher. Author, Syd Leibovitch U.S. economy adds 224,000 new jobs in June - The Bureau of Labor Statistics reported that 224,000 new jobs were created in June. That eclipsed analysts’ expectations of 162,000 new jobs. It marked a dramatic rebound from the disappointing 75,000 new jobs added in May. The unemployment rate inched up to 3.7% from 3.6% in May which was a 50 year low. The report also showed that 335,000 people entered the labor force in June which marked a substantial increase, as workers are feeling more positive about their job and wage prospects. This accounted for the slight increase in the unemployment rate. Average hourly wages were up 3.1% from one year ago.
Stock markets finis week near all time highs - Stocks finished the week close to record high levels as investors feel trade talks will resume with China, and interest rates hover near 2 year lows. Friday’s strong jobs report was considered a mixed bag to investors. While certainly a strong report, the flip side is that it gives The Fed a strong argument not to lower its benchmark rates. The Fed floated the possibility of a rate drop in May. Since then stocks have finished higher in 4 out of the last 5 weeks, and major indexes have gained over 8%. The Dow Jones Industrial Average closed the week at 26,922.12, up 1.2% from 26,599.96 last week. It’s up 15.4% year to date. The S&P 500 closed the week at 2,990.41, up 1.7% from 2,941.76 last week. It is up 19.3% year to date. The NASDAQ closed the week at 8,161.79, up 1.9% from 8,006.24 last week. The NASDAQ is up 23.0% year to date. Treasury Bond Yields - The 10-year treasury bond closed the month yielding 2.04%, almost unchanged from 2.00% last week. The 30-year treasury bond yield ended the week at 2.54%, unchanged from 2.52% last week. Mortgage rates remain at 2 year lows - The July 3, 2019 Freddie Mac Primary Mortgage Survey showed mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 3.75%, almost unchanged from 3.73% last week. The 15-year fixed was 3.18%, unchanged from 3.16% last week. The 5-year ARM was 3.45%, up slightly from 3.39% last week. Author, Syd Leibovitch |
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