Good Friday morning:
The National Debt is currently: $16,920,033,360,537.00
The Dow last traded at 14,792. The S&P 500 is trading at 1,632. Gold is trading at $1,400 an ounce, while oil futures at $107.54 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.49/Gal.
Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.76%. 30-year Treasury Bond yields last traded at 3.69%. Rates on 30-year fixed-rate mortgages are a hair above 4.5% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.
The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at $99.96, .75 points (or percent) better than we were last week as we continue to test the top of the current trading range (100). Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the better the rate.
In economic news this week; It’s the beginning of a long Labor Day holiday weekend and the markets are very quiet with most month end trading behind us and most of the big traders already heading out to the Hamptons to enjoy the last official summer holiday weekend. News this morning was mixed and in some ways contradictory. For instance, consumer income was flat but spending was down. You’d think that would signal lower consumer confidence, but it did not. Confidence was up for some strange reason. Based on current market conditions, if I had purchase loans, I would not want to enter a three day weekend unlocked.
Orders for big-ticket goods sank 7.3% in July, mostly because of fewer contracts for jetliners and large military goods. The retreat in orders, the first in four months, was expected after a steady increase in demand since spring. Still, the weak report underscores how slowly the manufacturing sector is expanding and suggests the economy entered the third quarter with little momentum.
The economy, Gross Domestic Product (GDP) rose at a 2.5% annual rate in the April-to-June period instead of an initial reading of 1.7%. The revision was mainly because of an improved trade picture and higher demand for American-made goods and services. This is due to a devalued Dollar which makes our goods more attractive to foreign buyers. But the Dollar has risen since which likely will reduce 3rd quarter GDP. At 2.5% growth employment has no chance of expanding. We would need to see a rate of about 6.00% for many quarters to see advancement in employment. The U.S. is forecast to grow 2.4% in the third quarter and 2.8% in the fourth quarter. The fact that growth has not surpassed 3% since the first quarter of 2012 remains troubling. GDP is the broadest measure of an economy’s health, reflecting the value of all the goods and services a nation produces.
Home prices in June posted another month of growth, though the data signals some moderation. With gains in cities across the country, home prices increased 2.2% in June, a strong result but down from 2.5% in May, according to the S&P/Case-Shiller gauge. Overall, the report shows that housing prices are rising but the pace may be slowing. Overall, home prices remain about 23% below a bubble peak. However, the story varies widely by city.
Led by drops in most of the U.S. Pending sales, or contracts on homes, fell 1.3% in July, a second month of declines, as mortgage rates continued to rise. Despite the recent drop, the pending-home sales gauge in July was up 6.7% from the year-earlier period, according to the National Association of Realtors.
American consumers grew slightly more optimistic in the waning days of summer as the effects of tax hikes earlier in the year continued to fade, according to the consumer confidence index which rose to 81.5 in August from 80.0 in July and nearly matched a five-year high. Rising confidence is generally a good sign for the economy, but the index remains well below its historical norm. Readings usually top the 100 mark during an expansionary phase. Another gauge of consumer sentiment the University of Michigan/Thomson Reuters consumer-sentiment index declined to 82.1 August from 85.1 in July, which was the highest level since, on grimmer views of current and coming economic conditions. I guess it depends on which index you watch and whom they poll.
Americans barely increased spending in July, another indication that the economy got off to a slow start in the third quarter. Consumer spending edged up 0.1% last month. The increase in spending matched the meager growth in personal income, which also rose a scant 0.1% in July. Consumers account for more than two-thirds of U.S. economic activity. When Americans buy more goods and services, businesses generate higher sales and profits and can afford to hire extra workers. That puts more money into the economy and further boosts spending and growth.
On the employment front; Signaling that the pace of layoffs remains relatively slow, a trend of jobless claims recently stuck close to the lowest level in six years. the number of people who applied last week for unemployment benefits declined by 6,000 to 331,000.