Bulls Keep Charging; Lowest Jobless Claims in 45 years! by Ron Schulz

For the week of January 22, 2018 — Vol. 16, Issue 4

>> Market Update

QUOTATION OF THE WEEK…“I admit that I may not always be right, but I am never wrong.” –Samuel Goldwyn, American movie producer

INFO THAT HITS US WHERE WE LIVE… The Census Bureau and HUD reported that 2017’s annual home building totals for starts, permits and completions all came in at their highest levels since 2007. Starts were at an estimated 1,202,100 units, 2.4% ahead of 2016. Completions totaled an estimated 1,152,300 units, up a solid 8.7% over the prior year. Permits hit an estimated 1,263,400 units, up 4.7% from a year ago. December did suffer an 8.2% dip in starts, but 90% of this came from the South, where the spike in storm-related construction has clearly ended.

Builders remain upbeat, as the National Association of Home Builders (NAHB) January confidence index registered 72, just two points down from December’s 18-year high. The NAHB chair said, “Builders are confident that changes to the tax code will promote the small business sector and boost broader economic growth. Our members are excited about the year ahead.” Mortgage applications were up 4.1%, according to the Mortgage Bankers Association Survey for the week ending January 12, with purchase applications up 3% from the week before.  

BUSINESS TIP OF THE WEEK… Don’t sell yourself based on what you think will sound good to prospects, but on what your strengths actually are. It will always be your most authentic pitch. 

>> Review of Last Week

THE BULLS KEEP CHARGING… Bullish investors have sent market indexes northward three weeks in a row, and though the gains weren’t quite as large last week compared to the first two, this has been a great year for stocks so far. In the first 13 days of trading in 2018, the broadly-based S&P 500 is up 5.1% and the tech-y Nasdaq up 6.3% on signs of higher corporate earnings and strong economic growth. And 2017 wasn’t bad either, as the market hasn’t had a serious pullback in more than a year, the S&P 500 not seeing as much as a 5% decline for 395 sessions.

Indicators of economic growth came with December Industrial Production gaining 0.9% and Capacity Utilization heading up to 77.9% from 77.2% the month before. Yes, the Philly Fed and New York Empire State indexes of manufacturing activity in those regions slipped slightly, but remain high. Initial weekly jobless claims, as well as continuing claims, hit their lowest levels in 45 years! In addition, payrolls are growing at a vigorous pace and wages are finally increasing faster for workers at the lower end of the income range than for those at the top.

The week ended with the Dow UP 1.0%, to 26072; the S&P 500 UP 0.9%, to 2810; and the Nasdaq UP 1.0%, to 7336.

Stocks up, bonds down is the classic relationship, and that’s exactly how things played out last week. The 30YR FNMA 4.0% bond we watch finished the week down .51, at $103.58. In Freddie Mac’s Primary Mortgage Market Survey for the week ending January 18, national average 30-year fixed mortgage rates rose to their highest level since May, but remain below where they were a year ago. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… CoreLogic reports average fair market rents rose faster than weekly wages in 60% of housing markets, which could encourage many more renters to consider buying a home. 

>> This Week’s Forecast

HOME SALES SLOW IN DECEMBER, GDP GROWS NICELY IN Q4 Analysts expect both the Existing Home Sales and New Home Sales reports to show slower annual sales rates for December, typical for that time of year. The GDP-Advanced read on Q4 should put economic growth just a tick under the 3% level reached in Q3.

>> 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 Jan 22 – Jan 26

Date Time (ET) Release For Consensus Prior Impact
Jan 24
10:00 Existing Home Sales Dec 5.70M 5.81M Moderate
Jan 24
10:30 Crude Inventories 01/20 NA -6.86M Moderate
Jan 25
08:30 Initial Unemployment Claims 01/20 240K 220K Moderate
Jan 25
08:30 Continuing Unemployment Claims 01/13 NA 1.952M Moderate
Jan 25
08:30 New Home Sales Dec 679K 733K Moderate
Jan 25
10:00 Leading Economic Index (LEI) Dec 0.5% 0.4% Moderate
Jan 26
08:30 GDP – Advanced Q4 2.9% 3.2% HIGH
Jan 26
09:00 Durable Goods Orders Dec 0.9% 1.3% Moderate


>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The Fed Funds futures market sees the central bank standing pat on rates at the end of this month. But a quarter percent hike should come in March, then a neutral stance from the Fed again in May. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.

Current Fed Funds Rate: 1.25%-1.50%

After FOMC meeting on: Consensus
Jan 31 1.25%-1.50%
Mar 21 1.50%-1.75%
May 2 1.50%-1.75%


Probability of change from current policy:

After FOMC meeting on: Consensus
Jan 31          2%
Mar 21        74%
May 2        28%

Ron Schulz

Senior Loan Officer

Supreme Lending

Direct Phone 214-346-5279

Cell Phone 214-794-4014

Website www.ronschulz.com

6060 N Central Exp # 438

Dallas TX 75206

NMLS # 266128

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