Weekly Review

Weekly Review

Trade tensions and inflation data dominated investor sentiment creating increased volatility in the stock market. Stocks got off to a good start last Monday primarily due to a lack of any bad news over the prior weekend. Stocks then fell on Wednesday when trade tensions surfaced on news the U.S. would continue its plan to enact an additional $200 billion worth of tariffs on a variety of Chinese goods to begin a few months from now. However, this threat was not met with an immediate response from China and investors viewed this as a positive sign helping the stock market to recover on Thursday. In fact, the technology laden NASDAQ Composite Index set a new all-time high on Thursday and Friday.

 

Inflation data came in a little hotter than expected with the Producer Price Index rising 0.3% in June following a 0.5% increase in May. On an annualized basis, Producer Prices have increased 3.4%, their fastest increase in almost seven years. Increased costs for steel and aluminum were noticeable suggesting the tariffs recently put in place by the Trump administration for these metals are beginning to drive input costs higher for manufacturers.

 

Also, inflation at the consumer level edged higher but was within the consensus forecast. The headline Consumer Price Index (CPI) in June increased 0.1% with the Core CPI rising 0.2%. However, consumer prices have risen 2.9% over the past year for its highest rate in six years. This year-over-year rate more than offsets the 2.7% increase in average annual wages over the same time period leading to growing inflation concerns. These concerns have shown up in the latest Consumer Sentiment report from the University of Michigan where it was noted “The primary concerns expressed by consumers were a decline in the future pace of economic growth and an uptick in inflation.”

 

In housing, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey released on Wednesday showed an increase in mortgage applications. The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 2.5% during the week ended July 6, 2018. The seasonally adjusted Purchase Index increased 7.0% from the week prior while the Refinance Index decreased by 4.0% from a week earlier to its lowest level since December 2000.

 

Overall, the refinance portion of mortgage activity decreased to 34.8% from 37.2% of total applications from the prior week. The adjustable-rate mortgage share of activity decreased to 6.3% from 6.7% of total applications. According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.76% from 4.79% with points increasing to 0.43 from 0.41.

 

For the week, the FNMA 4.0% coupon bond lost 7.9 basis points to close at $101.984 while the 10-year Treasury yield increased 0.068 of one basis point to end at 2.8308%. The Dow Jones Industrial Average gained 562.93 points to close at 25,019.41. The NASDAQ Composite Index advanced 137.59 points to close at 7,825.98. The S&P 500 Index added 41.49 points to close at 2,801.31. Year to date on a total return basis, the Dow Jones Industrial Average has gained 1.21%, the NASDAQ Composite Index has advanced 13.36%, and the S&P 500 Index has added 4.78%.

 

This past week, the national average 30-year mortgage rate decreased to 4.63% from 4.65%; the 15-year mortgage rate fell to 4.12% from 4.13%; the 5/1 ARM mortgage rate decreased to 3.95% from 3.99% while the FHA 30-year rate fell to 4.35% from 4.37%. Jumbo 30-year rates decreased to 4.54% from 4.59%.

 

 

The FNMA 30-year 4.0% coupon bond ($101.984, -7.9 bp) traded within a narrower 26.6 basis point range between a weekly intraday high of 102.016 on Friday and a weekly intraday low of $101.750 on Wednesday and Thursday before closing the week at $101.984 on Friday. Mortgage bonds traded within a narrow range between resistance and support levels ending the week close to resistance located at $101.988 on Friday. A weak sell signal on Tuesday was followed by a weak buy signal on Friday suggesting the bond could continue to consolidate and trade sideways like it did last week. This should result in stable mortgage rates this coming week.
Chart: FNMA 30-Year 4.00% Coupon Bond
 
Economic reports having the greatest potential impact on the financial markets are highlighted in bold.
 footer

I Am Holding Out for Spring!

Spring in New Hampshire

Claude McKay1889 – 1948

Too green the springing April grass, 
Too blue the silver-speckled sky, 
For me to linger here, alas, 
While happy winds go laughing by, 
Wasting the golden hours indoors, 
Washing windows and scrubbing floors. 

Too wonderful the April night, 
Too faintly sweet the first May flowers, 
The stars too gloriously bright, 
For me to spend the evening hours, 
When fields are fresh and streams are leaping, 
Wearied, exhausted, dully sleeping.

Financial Weekly Review

Fears of an escalating trade war between the U.S. and China along with the prospects for rising interest rates weighed on investor sentiment resulting in significant stock market volatility during the week. Trade officials in the U.S. and China went back and forth proposing new tariffs on each other’s imported goods. Last Monday, China announced it would retaliate against U.S. aluminum and steel tariffs with $3 billion in new tariffs of its own targeting mostly U.S. agricultural exports. On Tuesday, the U.S. countered with a new list of $50 billion in proposed tariffs on 1,300 Chinese products, and China promptly responded on Wednesday with its own $50 billion list of tariffs on U.S. aircraft, automobiles, and soybeans. President Trump responded by asking U.S. trade officials to consider tariffs on another $100 billion worth of Chinese imports.

The recent volatility in the financial markets may be a sign investors are overreacting to the sentiment portrayed in the media about trade wars. The President’s new economic advisor, Larry Kudlow, and Commerce Secretary Wilbur Ross downplayed the economic impact of the proposed tariffs by suggesting further negotiations with China will soon occur. Also, there was a report by Bloomberg that President Trump may announce a possible agreement on a renegotiated North American Free Trade Agreement (NAFTA) at the Summit of the Americas meetings in mid-April.

 

Another factor moving the markets was the Labor Department’s Employment Situation Summary (Jobs Report) for March that showed a far smaller increase in new job creation than expected. March saw the formation of 103,000 jobs versus a consensus estimate of 175,000. This lower number might be the result of the enormous increase of 326,000 jobs in February. Also, fears of future inflation were furthered by a solid 0.3% increase in Average Hourly Earnings for the month with an unemployment rate remaining at 4.1%. This will not deter the Federal Reserve from its plan to continue bumping interest rates higher. In fact, Fed Chairman Jerome Powell stated in a speech to the Economic Club of Chicago on Friday that he sees further gradual rate hikes on expectations that inflation will pick up this spring.

 

In the mortgage industry, the number of mortgage applications decreased according to the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey. The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased by 3.3% during the week ended March 30, 2018. The seasonally adjusted Purchase Index decreased by 2.0% from the week prior while the Refinance Index decreased 5.0%.

 

Overall, the refinance portion of mortgage activity fell to 38.5% from 39.4% of total applications from the prior week. The adjustable-rate mortgage share of activity fell to 6.5% from 7.0% of total applications. According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance remained at 4.69% with points remaining unchanged at 0.43.

 

For the week, the FNMA 4.0% coupon bond lost 1.5 basis points to close at $102.594 while the 10-year Treasury yield increased 3.46 basis points to end at 2.7753%. The major stock indexes moved lower during the week.

 

The Dow Jones Industrial Average declined 170.35 points to close at 23,932.76. The NASDAQ Composite Index fell148.33 points to close at 6,915.11. The S&P 500 Index lost 36.40 points to close at 2,604.47. Year to date on a total return basis, the Dow Jones Industrial Average has fallen 3.18%, the NASDAQ Composite Index has gained 0.17%, and the S&P 500 Index has lost 2.59%.

 

This past week, the national average 30-year mortgage rate decreased to 4.48% from 4.51%; the 15-year mortgage rate declined to 3.86% from 3.89%; the 5/1 ARM mortgage rate increased to 3.65% from 3.64% and the FHA 30-year rate decreased to 4.25% from 4.30%. Jumbo 30-year rates fell to 4.50% from 4.54%.

 

The FNMA 30-year 4.0% coupon bond ($102.609, +25.0 bp) traded within a narrower 45.3 basis point range between a weekly intraday low of $102.188 on Monday and a weekly intraday high of $102.641 on Wednesday before closing the week at $102.609 on Thursday.The FNMA 30-year 4.0% coupon bond ($102.59, -1.5 bp) traded within a narrower 40.6 basis point range between a weekly intraday low of $102.313 on Tuesday and Friday and a weekly intraday high of $102.719 on Friday before closing the week at $102.594 on Friday.

Mortgage bonds traded in a sideways direction within a narrow range between the 25-day and 50-day moving averages. These two moving averages serve as nearest technical support and resistance levels respectively.

 

The chart shows the bond is just below the “overbought” level while showing a new buy signal from a positive stochastic crossover. This suggests there is some room for price improvement with the prospects the bond will stay above its 50-day moving average. If the bond can manage to stay above the 50-day moving average, mortgage rates should remain stable at current levels or may improve very slightly.
Chart: FNMA 30-Year 3.5% Coupon Bond
Economic reports having the greatest potential impact on the financial markets are highlighted in bold.
 

Happy Monday

images.jpeg

OK, so spring is here and we still have snow on the ground, UGH!

I know you are thinking, how can I put my house on the market when I still have snow in my yard.  Not to worry, most buyers know and understand this.  However if you are concerned about any potential buyer not having vision, I would suggest finding last year photos of your yard.  They can always be included in the listing to show them.  You can also leave them on your counter or table during showings.

Food for thought…

My Best

June

Spring Anyone?

images-1.jpeg

I  think we are all eternally optimistic, you would need to be if you live in the New England area.  This has been one of the longest, coldest and snowiest winters we have seen in years.

That being said, it’s now spring, no really I’m serious….

Real estate believe it or not is HOT!!  For some reason, inventory is low and there seem to be more buyers than sellers.  If you are thinking of selling now is the time!  I have listed a few towns with their active listings, the numbers a staggering low:

  • Salem   –  39
  • Windham – 25
  • Londonderry – 23
  • Derry – 34
  • Hampstead – 15
  • Atkinson – 8
  • Pelham – 25

If you’ve followed the market, you would know these are very low numbers.  You may think, UGH I can’t even imagine getting my house ready to sell.  Not to worry, here are (3) simple projects that can be done in a weekend!

  1. Declutter- pack like your moving, take all the STUFF and pack it up
  2. Clean – deep clean your home or hire someone to help, its short money to save you time
  3. Hire a fantastic Real Estate Agent!

Sometimes its hard to start the process, I would like to suggest you create a time line with your agent and press GO.

I am happy to help in any way, please call if I can assist you in selling your home or if you have a friend or family who is in need, I work by referral only.

If you are looking to purchase a home, I can help with that too.

All the best,

June

 

 

Market Update

Please enjoy this quick update on what happened this week in the housing and financial markets.
The government shutdown had a nominal effect on markets and no effect on rates. Another shutdown is possible February 8th, the new deadline for a deal.
The dollar slumped this week, its biggest weekly decline in 18 months. Treasury Secretary Steven Mnuchin says a weaker dollar could boost U.S. trade though.
Jobless claims were up from last week’s 45-year low, but still lower than expected. The labor market continues to tighten with near full employment.
Existing home sales were down 3.6% in December from November, but were up 1.1% year-over-year. A lack of supply of homes on the market played a role.
New home sales were also down in December, blamed partly on unseasonably cold temperatures. However, new home sales were 14% higher than a year ago.
Rising mortgage rates have spurred more buyers off their couches and into the market. Mortgage applications were up 4.5% over last week, 6.1% over last year.

 

 

To steal ideas from one person is plagiarism. To steal from many is research.
Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These rate trends can differ from our own and are subject to change at any time.

 

Sincerely,
Roger Odoardi
Blue Water Mortgage
12906
(603) 758-1651
roger@bluewatermtg.com
www.bluewatermtg.com