QUOTE OF THE WEEK… “The key to everything is patience. You get the chicken by hatching the egg, not by smashing it.” –Arnold H. Glasow, American humorist
INFO THAT HITS US WHERE WE LIVE… It’s taken a bit of patience to see Pending Home Sales go up after months of stagnant activity. But go up it did in March. The Pending Home Sales index of contract signings shot up 3.4% for the month, its first gain in the last nine months. The National Association of Realtors (NAR) chief economist explained: “After a dismal winter, more buyers got an opportunity to look at homes last month and are beginning to make contract offers.”
Looking ahead, the NAR economist was upbeat: “Sales activity is expected to steadily pick up as more inventory reaches the market, and from ongoing job creation in the economy.” Some of that added inventory could be from sellers coming off the sidelines as home prices continue to recover. The Case-Shiller/S&P 500 index of home prices in 20 key metros went up 0.8% in February (seasonally-adjusted). This widely followed reading shows prices up 12.9% in the past year.
BUSINESS TIP OF THE WEEK… Experts say if you tend to get nervous before a presentation, rehearse it as much as you can. Practicing in front of a mirror builds confidence and helps you put more flow into your delivery.
>> Review of Last Week
GOOD ECONOMICS, BAD GEOPOLITICS… It was another one of those paradoxical weeks where investors had to react to things going in both directions. Biggest of the economic uppers was the April jobs report, coming in with a way better than expected 288,000 new payrolls, the biggest gain in two years. But geopolitics sent stocks down, as the Ukraine crisis made Wall Streeters nervous. Although suffering a down day Friday, all three major market indexes finished ahead for the week.
The Unemployment Rate dropped to 6.3%, but this positive was actually a negative, caused by a record 806,000 people leaving the labor force in April. Also a downer was the Preliminary GDP reading for Q1, which showed the economy growing at a barely perceptible 0.1% rate. But ISM Manufacturing and Pending Home Sales bested expectations, while Personal Spending came in with its strongest reading since 2009, up 0.5% for the month. This shows that consumers are continuing to drive the 70% of the economy they support.
The week ended with the Dow up 0.9%, to 16513; the S&P 500 up 1.0%, to 1881; and the Nasdaq up 1.2%, to 4124.
Worries over Ukraine were strong enough to rally bonds, in spite of the surprising April jobs report and the Fed trimming its monthly bond purchases another $10 billion on Wednesday. The FNMA 4.0% bond we watch finished the week up .86, at $105.03. National average fixed mortgage rates dipped back down in Freddie Mac’s Primary Mortgage Market Survey for the week ending May 1. This followed the release of the disappointing Q1 GDP number. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… Overall private residential construction spending in Q1 was up 16.7% over a year ago. Single-family private construction spending in March was up 13.2% (seasonally adjusted) versus last year.
>> This Week’s Forecast
SERVICE SECTOR GROWING, PRODUCTIVITY AND TRADE DEFICIT SHRINKING… A quiet week as far as economic reports go, with the familiar good news, bad news theme. ISM Services should show continued expansion in April in the sector of the economy that creates the most jobs. But the Trade Balance is projected to be a bit bigger in March and the Preliminary Productivity reading for Q1 is forecast to shrink, which is bad news for that measure.
>> 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.