Getting back on track with this as well!
QUOTE OF THE WEEK… “Discontent is the first necessity of progress” –Thomas Edison, American inventor
INFO THAT HITS US WHERE WE LIVE… Many people were not very content with last week’s Pending Home Sales report. This measure of contracts signed to buy existing homes fell 0.4% in June. For some observers, that raised concerns about future Existing Home Sales. However, the prior month’s report measured Pending Home Sales up 5.8%, so one could reasonably expect a rebound in existing home closings come July. We’ll see.
There was absolutely no discontent expressed around the Standard & Poor’s/Case-Shiller home price index. This revealed home prices in 20 major U.S. metros were up 1% in May and up a very impressive 12.2% versus a year ago. By this index’s measure, home prices are still down from their peak in 2006. But the peak-to-trough decline is now about a third smaller than it was as recently as March 2012. This is a national average. Home prices in two of Case-Shiller’s 20 cities have actually hit all-time highs, going past peaks set in 2007 and 2006!
BUSINESS TIP OF THE WEEK… Productivity experts suggest following a simple daily routine to stay on track. Take 5 minutes at the start to set the day’s goals. Then check how you’re doing every hour. Spend a few minutes at the end of the day to evaluate your results.
>> Review of Last Week
JOBS DOWN, STOCKS UP… Friday, the July Employment Report’s nonfarm payrolls number fell short of estimates, but two major stock indexes still logged small gains, to close the week at record highs, the Dow for the 30th time and the S&P 500 for the 25th time this year. The tech-heavy Nasdaq index didn’t do too badly either. July’s 162,000 new nonfarm payrolls were joined by downward revisions to prior months for a net gain of only 136,000 jobs. But the unemployment rate dipped to 7.4%, although about half of the decline was attributed to a reduction in the labor participation rate, resulting in a drop in the labor force of 37,000 people.
This weaker than expected jobs report followed a Fed meeting that called economic growth “modest” now, instead of “moderate.” Those words are synonyms in the real world, but in Fedspeak, they signal a downgrade. The Fed therefore said it wasn’t going to taper bond purchases just yet, which totally pleased investors. There was also good news that actually was good. The advanced estimate for Q2 GDP pegged growth at 1.7%, beating estimates. Manufacturing surprised to the upside, with the ISM up to 55.4, ahead of forecasts. In addition, new weekly jobless claims fell by 17,000 to 326,000.
The week ended with the Dow up 0.6%, to 15658; the S&P 500 up 1.1%, to 1710; and the Nasdaq up 2.1%, to 3690.
A roller coaster week in the bond market ended on an uptick, as the disappointing jobs report inspired a flight to the safety of bonds. The FNMA 3.5% bond we watch ended the week up .02, to $100.30. Freddie Mac’s Primary Mortgage Market Survey for the week ending August 1 reported national average fixed mortgage rates edged up after two weeks of declines. This didn’t reflect the bond market’s reaction to the Fed statement, which came the next day. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… Fiscal policy refers to decisions by the President and Congress that usually relate to taxation and government spending and have the goals of full employment, price stability, and economic growth.
>> This Week’s Forecast
SERVICES SECTOR UP, TRADE DEFICIT DOWN… A very quiet week for economic reports, a welcome respite after last week’s data derby plus Fed meeting melodrama. The ISM Services index is expected to show continued expansion in July. That sector of the economy generates well over 80% of U.S. jobs, so growth there bodes well for the recovery.
The Trade Balance for June unfortunately is forecast still north of $40 billion for June, although this is down from May’s reading. It should be noted that a big part of the country’s imports expenditure is for oil.
>> 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.