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Market Update

QUOTATION OF THE WEEK… “The only way to do great work is to love what you do.” –Steve Jobs, American entrepreneur, inventor and industrial designer

INFO THAT HITS US WHERE WE LIVE … Folks sure did great work in the housing market last month. May Existing Home Sales went up 1.1% to a 5.62 million unit annual rate, up 2.7% over a year ago. Sales of condos and coops were up, but most of the growth came from single family homes. The median price of an existing home came in 5.8% ahead of a year ago, hitting its highest level on record. Yet demand remained strong, with the typical property on the market just 27 days, the shortest time frame since they began tracking it in 2011. The months’ supply edged up to 4.2, all due to more inventory, a good thing, yes.

Even greater work got done with new homes. In May, New Home Sales pushed up 2.9%, going solidly over the 600,000 threshold, to a sales rate of 610,000 units per year. This was above expectations,  sending sales 8.9% ahead of a year ago. Figures for prior months were revised upward, and that trend should prevail. Job gains are pushing wages higher and the low homeownership rate should deliver more buyers as the economy improves. The median price of new homes sold was up an oddly high 16.8% over a year ago, but last May saw an unusually big price drop. The FHFA Index of prices for homes financed with conforming mortgages is up just 6.8% from a year ago.

BUSINESS TIP OF THE WEEK… Do what you love and delegate the rest. Many successful people say they saw a huge business uptick after hiring their first assistant–and almost all say they wish they had hired that assistant sooner.

>> Review of Last Week

TWO WENT SIDEWAYS, ONE SOARED… The blue chip Dow and the broadly-based S&P 500 had flattish performances, although both ended up for the week, the Dow by fewer than a dozen points and the S&P by just 0.2%, but our tech-y Nasdaq friends soared to a 1.8% weekly gain. Investors seemed to lack the conviction to move the market up or down, except for certain technology, biotech and energy issues. Beyond the housing reports covered above, there wasn’t a whole lot of economic news to chew on. Crude fell for the fifth week in a row, below $43 a barrel for the first time in 18 months, which should help us all at the gas pump.

There were, however, some interesting financial developments. The Fed announced the results of its latest stress tests on the nation’s largest banks. All 34 institutions passed the quantitative portion of this year’s test, meaning they all have “strong” levels of capital and would be able to keep lending even during a severe recession. St. Louis Fed President James Bullard told a convention in Nashville that the Fed can afford to stop raising short-term rates and wait and see where the economy is headed. But Cleveland Fed President Loretta Mester said the Fed must continue raising rates to avoid inflation. We like Bullard, don’t you?

The week ended with the Dow up just 11 points, to 21395; the S&P 500 UP 0.2%, to 2438; and the Nasdaq UP 1.8%, to 6265.

Bond prices held up well despite Friday’s better than expected May New Home Sales. Good economic reports tend to drive investors back into riskier stocks, but many still liked the safety of bonds. The 30YR FNMA 4.0% bond we watch finished the week UP .06, at $105.48. Freddie Mac’s Primary Mortgage Market Survey for the week ending June 22 saw national average 30-year fixed mortgage rates dip down a tick, remaining near their lows for the year. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Fannie Mae recently reported that the share of those saying it’s a good time to sell surpassed those saying it’s a good time to buy. This has happened only twice in that survey’s history.

>> This Week’s Forecast

PENDING HOME SALES, INFLATION, SPENDING, MANUFACTURING, GDP ALL UP… It’ll be nice to see Pending Home Sales come back up if forecasts hold true. Likewise, the Core PCE Prices inflation measure should be up, though not enough to curtail Personal Spending. The Chicago PMI read on Midwest manufacturing is forecast solidly over the 50 mark. And the GDP-3rd Estimate is predicted to stay at 1.2%, modest but typical of Q1 performance the last few years.

>> 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.

Economic Calendar for the Week of Jun 26 – Jun 30

 Date Time (ET) Release For Consensus Prior Impact
M
Jun 26
09:45 Durable Goods Orders May -0.6% -0.7% Moderate
Tu
Jun 27
10:00 Consumer Confidence Jun 116.7 117.9 Moderate
W
Jun 28
10:00 Pending Home Sales May 0.5% -1.3% Moderate
W
Jun 28
10:30 Crude Inventories 06/24 NA -2.50M Moderate
Th
Jun 29
08:30 Initial Unemployment Claims 06/24 241K 241K Moderate
Th
Jun 29
08:30 Continuing Unemployment Claims 06/17 NA 1.944M Moderate
Th
Jun 29
08:30 GDP – 3rd Estimate Q1 1.2% 1.2% Moderate
Th
Jun 29
08:30 GDP Deflator – 3rd Est. Q1 2.2% 2.2% Moderate
F
Jun 30
08:30 Personal Income May 0.3% 0.4% Moderate
F
Jun 30
08:30 Personal Spending May 0.1% 0.4% HIGH
F
Jun 30
08:30 Core PCE Prices May 0.1% 0.2% HIGH
F
Jun 30
09:45 Chicago PMI Jun 57.8 59.4 HIGH
F
Jun 30
10:00 U. of Michigan Consumer Sentiment – Final Jun 94.7 94.5 Moderate