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Archive for the 'Market Trends' Category

Economic Highlights for the Week Ending June 18, 2010

Economic Highlights for the Week Ending June 18, 2010

MONDAY, June 14th Fed funds futures traders believe monetary policy will remain unchanged for the rest of this year while lowering expectations for a rate adjustment in early 2011. Traders are pricing in a roughly a 48% chance the Fed will bump the fed funds rate to 0.5% at their January 2011 meeting down from 58% one week ago. The fed funds rate has been targeted in a range of 0% to 0.25% since December 2008.

TUESDAY, June 15th The NAHB housing market index fell sharply in June, dropping to a level of 17 from a reading of 22 in May. The swoon in homebuilder confidence may be related to the downshift in the market following the expiration of the homebuyer tax credit. Weak economic data recently, especially the employment report for May also weighed. Builders lowered scores of current single family sales and sales six months from now while foot traffic through model homes decreased. The homebuyer tax credit provided temporary support for the housing market; now, recovery in the housing market is once again dependent upon growth in the economy, namely jobs and incomes.

WEDNESDAY, June 16th The MBA mortgage applications index jumped 17.7% to 659.9% for the week ending June 11. The purchase index rose 7.3% last week, rebounding from its lowest level since the end of 1996 in the previous week. Until last week, the purchase index had fallen nearly 40% in the five weeks since the expiration of the tax credit indicating a slower pace of home sales this quarter and into the third. The refinance index increased 21.1%on the week, its fifth increase in the past six weeks. Refinancings account from almost 75% of total application activity. The producer price index fell 0.3% in May as food prices fell 0.6% and energy prices dropped 1.5%. Excluding food and energy prices from the index, the core PPI rose 0.2% on the month and is up 1.3% on the year. These data indicate subdued inflation at the wholesale level. Industrial production increased 1.2% after a 0.7% gain in April. The May gain was led by a 4.8% surge in utilities usage though manufacturing output also increased 0.9% on the month. Total output has risen in 10 of the last 11 months and is now 7.6% above its year ago level. Although industrial activity has been in recovery mode for almost a year, it remains 7.9% below its December 2007 peak. Housing starts fell 10.0% in May to a 593k annual rate from a rate of 659k in April. The tumble in new construction starts last month correlates to the end of the homebuyer tax credit and the consequential pullback in demand for homes. Housing starts are now at their lowest level of 2010 but are still 7.8% above their year ago level. After the initial retraction associated with the homebuyer tax credit the outlook for home construction improves but does remain dependent upon a pick-up in job creation and the broader economy.

THURSDAY, June 17th The consumer price index fell 0.2% in May as energy prices tumbled 2.9%. Headline consumer inflation is now up a modest 2.0% on the year. The core CPI, which excludes food and energy costs rose 0.1% last month and was up by just 0.9% on the year. Soft final demand and slack in the economy are subduing inflationary pressures which will allow the Fed hold rates down in order to revive the economy. Jobless claims rose 12k to 472k for the week ending June 12. The level of claims remains stubbornly high which unfortunately is consistent with weak job creation in the private sector last month. The May employment report combined with the elevated trend in initial claims suggests ongoing duress in labor market conditions.

FRIDAY, June 18th

Stock Market Close for the Week

Index Latest A Week Ago Change DJIA 10450.64 10211.07 +239.57 or +2.35% NASDAQ 2309.80 2243.60 +66.20 or +2.95%

WEEK IN ADVANCE

New and existing home sales for May, due out in the coming week will inform on the depth of the post-tax credit pullback. Also, the FOMC will meet and release their policy statement Wednesday. We may see recent weakness reflected in their outlook. Another $108 billion in new supply is scheduled to hit the bond market this week as well.

Key Interest Rates Latest 6 Mos Ago 1 Yr Ago Prime Rate 3.25 3.25 3.25 Fed Discount 0.75 0.50 0.50 Fed Funds 0.21 0.12 0.19 11th District COF 1.825 1.259 1.380 10-Year Note 3.22 3.56 3.75 30-Year Treasury Bond 4.14 4.48 4.55 30-Yr Fixed (FHLMC) 4.75 4.94 5.38 15-Yr Fixed (FHLMC) 4.20 4.38 4.89 1-Yr Adj (FHLMC) 3.82 3.34 4.95 6-Mo Libor (FNMA) 0.75188 0.48813 1.2400 Sources: IBC’s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

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State’s Home Default Cases Plunge

A 40.2% drop in the first quarter suggests that the foreclosure crisis is easing.

April 21, 2010  Alejandro Lazo   Copyright 2010 Los Angeles Times

The California foreclosure crisis appears to be abating, new data show, as the federal government and big lenders step up efforts to keep troubled borrowers in their homes.

Mortgage default notices — the first step toward foreclosure — plunged 40.2% statewide in the first three months of the year compared with the same period in 2009, according to San Diego research firm MDA DataQuick.

Foreclosure sales dropped 1.7% from a year earlier and 16.1% from the last three months of 2009, DataQuick said Tuesday.

The numbers suggest that the housing market won’t be flooded by a fresh wave of bank repossessions, which had been seen as a major threat to the market’s recovery.

“It is surprisingly good news,” said Gerd-Ulf Krueger, principal economist at Housingecon.com. “There is still a lot of supply lurking out there, but at this point, it looks like it is pretty much under control.”

Stuart A. Gabriel, director of UCLA’s Ziman Center for Real Estate, said the declining foreclosure numbers are “consistent with a broad range of indicators that are suggestive of not only a healing economy but the beginning of healing in the housing market.”

Southern California home prices jumped 14% in March from the same month a year ago, to a median $285,000.

Even so, economists note that further gains statewide are jeopardized by continued high unemployment, particularly in the Inland Empire and the Central Valley.

Foreclosure activity remains concentrated in these inland areas, which suffer from above-average unemployment. DataQuick said mortgages were most likely to go into default in Merced, Stanislaus and San Joaquin counties. Defaults were least likely in the Bay Area counties of Marin, San Francisco and San Mateo.

“In coastal California, things are looking pretty decent,” said Richard Green, director of the USC Lusk Center for Real Estate. “I still think if you get into the Inland Empire, Fresno, Bakersfield, Modesto, people are really struggling because the unemployment rate is so high — so that people just need help to get out from under.”

California loan default notices peaked at 135,431 in the first quarter of 2009. Since then, the federal government has put increasing pressure on banks to work with homeowners behind on their payments. At the same time, experts say, banks have recognized that flooding the market with foreclosures weakens the value of the properties they have taken back and must resell.

Comparing Depressions…Is there really any Comparison?

By: Malcolm H. Scott

“The Great Depression was, no doubt, depressing”

I thought I’d compile a few paragraphs to give us a glimpse of the past as the majority of us weren’t around back then. Thank God, because it sure wasn’t much fun.

As it turns out the Stock Market Crash of 1929 didn’t create the Great Depression,

it was just perhaps the last tick of the bomb that imploded the whole market and world economy. The SEC, The Security and Exchange Commission had not been created yet and the practices in the 20’s were operating in a rather less-than-ethical space. New Companies like General Motors, seemed to be making everyone rich, operators like Joseph Kennedy, (and a slew of others) were notorious for making the big bucks in questionable practices. Investment scams that inflated values of stocks ( that were eventually dumped by the scammers) and consequently, left the investor pools holding the proverbial bag. These were the scams of the day. Read the rest of this entry »