Inside Lending Newsletter: Review of last Week: Historic DOW

Inside Lending Newsletter


For the week of March 6, 2017 – Vol. 15, Issue 9

>>Market Update 

QUOTATION OF THE WEEK… “High expectations are the key to everything.” –Sam Walton, American businessman

INFO THAT HITS US WHERE WE LIVE … The founder of the world’s largest retailer would have preferred to see higher expectations in the latest Pending Home Sales Index. This National Association of Realtors (NAR) measure of contracts signed on existing homes declined 2.8% in January, indicating we should expect fewer closings on these homes a couple of months out. But Pending Home Sales are still ahead of where they were a year ago. And actual existing home sales are forecast to reach 5.57 million this year, up 2.2% from 2016, with the median home price up 4%. Last year saw these sales grow 3.8%, with prices up 5.1%.

There is concern about the shortage of listings in many areas, which is edging up home prices. Indeed, the latest Case-Shiller Home Price Index reported a 5.8% annual increase in December, a 30-month high. Yet the Index Committee’s Chair pointed out: “Looking at real or inflation-adjusted home prices…the annual increase in home prices is currently 3.8%.” His conclusion? “Home prices are rising, but the speed is not alarming.” And demand is there. The NAR chief economist explained that as households grow more confident in their personal finances and job growth continues throughout the country, home sales increase across the country.

BUSINESS TIP OF THE WEEK… Get in the habit of taking action, instead of just thinking about it. Don’t be rash, of course, but do spend less time reflecting–and more time doing. You’ll be surprised at how much you’ll accomplish.

>> Review of Last Week

HIGHER... That one word was the theme of the week in three big ways. First, stocks continued to push higher, as the S&P 500 posted its sixth weekly gain in a row and the Dow passed 21,000 without much effort. The blue chip index crossed the historic 20,000 threshold just a few weeks ago, which makes this 1,000 point advance the Dow’s fastest gain in history. Stocks got a big boost Wednesday following President Donald Trump’s speech to Congress the night before. Investors liked his commitment to $1 trillion in infrastructure spending, tax cuts for businesses and the middle class and the fact that pundits saw the address as “presidential.”

Second, February economic readings went higher.
The ISM Index of U.S. manufacturing and the Chicago PMI for the Midwest beat expectations, as did the ISM Services index for the sector of the economy that delivers the most jobs. Consumer Confidence hit a 15-year high, with Americans more confident about the present and the future. Third, we got a strong indication that an improving economy means interest rates may soon go higher. Friday, Fed Chair Janet Yellen said that if employment and inflation “evolve in line with our expectations…a further adjustment of the Federal funds rate would likely be appropriate” March 15. We’ll watch this Friday’s jobs report.

The week ended with the Dow UP 0.9%, to 21006; the S&P 500 UP 0.7%, to 2383; and the Nasdaq UP 0.4%, to 5871.

The Fed’s hawkish rate comments hurt bond prices Friday, although U.S. Treasuries recovered, ending up little changed. But the 30YR FNMA 4.0% bond we watch finished the week down .80, at $104.58. However, national average 30-year fixed mortgage rates broke the holding pattern they’ve been in the past month and moved lower in Freddie Mac’s Primary Mortgage Market Survey for the week ending March 2. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Billionaire investor Warren Buffett says manufactured homes account for about 70% of new American homes costing less than $150,000. His Berkshire Hathaway firm owns the largest U.S. builder of such homes. 

>>This Week’s Forecast

PRODUCTIVITY UP, WAGES GAIN, JOBS MODERATE We’ll have a revision on the Productivity reading for Q4, which is forecast to be up, something the Fed wants to see as an indicator of a stronger economy. The big focus will be Friday’s February jobs report. Hourly Earnings should be up, showing an important continuing increase in wages. Analysts predict fewer new Nonfarm Payrolls than were added in January, just below the 200,000 threshold.

>> 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 Mar 6 – Mar 10


 Date Time (ET) Release For Consensus Prior Impact
Mar 7
08:30 Trade Balance Jan -$48.5B -$44.3B Moderate
Mar 8
08:30 Productivity – Rev. Q4 1.5% 1.3% Moderate
Mar 8
08:30 Unit Labor Costs – Rev. Q4 1.6% 1.7% Moderate
Mar 8
10:30 Crude Inventories 3/4 NA +1.5M Moderate
Mar 9
08:30 Initial Unemployment Claims 3/4 240K 223K Moderate
Mar 9
08:30 Continuing Unemployment Claims 2/25 NA 2.066M Moderate
Mar 10
08:30 Average Workweek Feb 34.4 34.4 HIGH
Mar 10
08:30 Hourly Earnings Feb 0.2% 0.1% HIGH
Mar 10
08:30 Nonfarm Payrolls Feb 188K 227K HIGH
Mar 10
08:30 Unemployment Rate Feb 4.7% 4.8% HIGH
Mar 10
14:00 Federal Budget Feb NA -$192.6B Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Four out of five economists see the central bank raising rates a quarter of a percent at next week’s FOMC meeting. But they expect no further hikes the next two meetings. Note: In the lower chart, an 80% probability of change is only a 20% probability the rate will stay the same.

Current Fed Funds Rate: 0.5%-0.75%


After FOMC meeting on: Consensus
Mar 15 0.75%-1.0%
May 3 0.75%-1.0%
Jun 14 0.75%-1.0%

Probability of change from current policy:


After FOMC meeting on: Consensus
Mar 15       80%
May 3       82%
Jun 14       90%


Ron Schulz
Senior Loan Officer
NMLS# 266128
13140 Coit Rd # 502
Dallas, TX 75240
Office: 214-346-5279
Mobile: 214-794-4014
Fax: 972-284-0715


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