The National Debt is currently: $17,331,747,562,682.00 higher by about 10 BILLION. I post this so we will be aware of what we are leaving the next generation.
The Dow last traded at 16,480 about 100 pts higher than last week. The S&P 500 is trading at 1,844. Gold is trading at $1,250 an ounce, while oil futures at $94.25 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.31/Gal.
Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.84%. 30-year Treasury Bond yields last traded at 3.77%. Rates on 30-year fixed-rate mortgages are about 4.625% 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 100.52 about 0.50 Pt better than where we were last Friday at this time. 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; the reader’s digest version is the economy continues to crawl along but at least in a positive direction.
So here’s something I rarely get to print, our government actually recorded a record budget “surplus” of $53 billion in December, helping to bring the deficit down 41% in the first quarter of fiscal 2014. Nearly $40 billion in payments from government-controlled mortgage giants Fannie Mae and Freddie Mac contributed to the surplus, the largest on record for the month of December. The last time there was a December surplus was in 2007, of $48 billion.
Tax receipts were also up 5% in the month. The deficit for October, November and December was $174 billion, $120 billion below the year-ago period, reflecting continued improvement in the economy, increased tax revenue and lower spending. But before we get too excited, it was the first gap of below $1 trillion dollars spent over what we brought in, of Obama’s presidency. We still have a long way to go.
The National Federation of Independent Business said its small-business optimism index rose 1.4 points to 93.9 in December on gains in the component of those who expect the economy to improve and those who expect real sales to be higher. Three of the ten components were negative. The NFIB said the index was nonetheless short of its recovery high of 95.4 and well below the readings over 100 that typify post-recession periods.
Retail Sales rose by a modest 0.2% in December as Americans stocked up on food and drinks for the holidays, bought more clothes and purchased more goods online. The Commerce Department reported the increase in sales last month would have been a healthier 0.7% if the auto sector was excluded. Auto sales hit a post-recession high in November but then tapered off last month.
The so-called Beige Book, used to help the Fed Gods prepare for their next meeting, showed steady manufacturing growth, rising consumer spending and improving real estate markets. Firms that provide services which experienced severe contractions in business during the recession, expect economic activity will continue improving at a moderate or strong pace. The Beige Book is a collection of anecdotes from executives at the largest employers in the 12 Federal Reserve districts and others about the economy. At its last meeting, the Fed decided to reduce the pace of its monthly bond purchases to $75 billion from $85 billion in January, and the expectation is for a similar cut after their meeting later this month.
On the inflation front: wholesale prices rose in 0.4% December the first time in three months, largely reflecting higher costs of gasoline and tobacco, but there were few signs of any inflationary pressure in the economy. The energy index jumped 1.6%, with gasoline accounting for more than half the increase. Stripping out the volatile food and energy categories, core wholesale prices rose 0.3%. The core index is viewed as a more accurate gauge of long-term inflation trends, but it’s only risen 1.4% in the past 12 months.
Prices for consumer goods and services climbed in December at the fastest pace in five months, spurred by higher costs of energy and housing. Yet inflation for the full year was quite tame, with consumer prices increasing just 1.5% from 1.7% in 2012. The last time consumer prices rose less than 2% for two straight years was in 1997-1998. The core CPI, which excludes volatile food and energy costs, rose a smaller 0.1% which was just 1.7% in 2013. The cost of housing rose 0.2% and the price of clothing shot up 0.9%. Yet airfares declined.
On the Real Estate front: A gauge of home-builder confidence declined in January after jumping up in December, but still signaled that builders are optimistic about sales. The National Association of Home Builders/Wells Fargo housing-market index reached 56 this month, a small drop from 57 in December. Results above 50 signals that builders, generally, are optimistic about sales trends. NAHB’s builder-confidence gauge has increased 19% over the past year, and is higher than levels typically associated with current construction rates. A recent peak of 58 was hit in August, when the builder-confidence gauge was the highest since 2005.
Construction on new homes fell 9.8% in December, pulling back after a November surge, but the whole of last year had the strongest showing since 2007. Despite December’s decline, home-construction starts for all of 2013 hit 923,400, the highest annual total since 2007, pointing to the housing market’s continued recovery last year.
On the Employment front: The number of Americans who applied last week for unemployment benefits fell slightly and is now back to a level that prevailed shortly before the Thanksgiving holiday, a signal that layoffs remain at a post-recession low. Initial jobless claims dipped by 2,000 to 326,000 last week. That’s the smallest number in six weeks.
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