>> Market Update QUOTE OF THE WEEK... "Saints are sinners who kept on going" --Robert Louis Stevenson, Scottish novelist, poet, and essayist
INFO THAT HITS US WHERE WE LIVE... Prescott Home prices also keep on going, and in a decidedly upward direction. The National Association of Realtors (NAR) reported that for Q1 of this year, the median existing home price jumped 11.3% over last year, the largest annual gain since Q4 of 2005. But Q1 inventory was down 16.8%. The NAR's chief economist expounded: "Inventory conditions are expected to remain fairly constrained this year, so overall price increases should be well above the historic gain of one-to-two percentage points above the rate of inflation."
A leading research analytics firm reported that home prices in March jumped 10.5% year over year, posting their biggest annual gain in seven years. Plus, the 1.9% price increase over February was the 13th monthly gain in a row. These analysts expect April to register a 12% annual and a 2.7% monthly price hike, if you exclude distressed sales. Finally, Fannie Mae reported a milestone in consumer optimism about home prices: the majority of Americans they surveyed now expect home prices to increase over the next year.
BUSINESS TIP OF THE WEEK... From Warren Buffett: "...the biggest thing that kills [businesses] is complacency. You want a restlessness, a feeling that somebody's always after you, but you're going to stay ahead." >> Review of Last WeekBREAKING RECORDS AGAIN... Investor enthusiasm pushed U.S. stocks to their third week of record-setting gains. Friday the Dow ended solidly above 15,000, at its highest close ever. Not to be outdone, the S&P 500 also hit an all-time high, well north of 1600. There wasn't much economic data or financial news to distract investors and quite a few Q1 corporate earnings reports continued to surprise to the upside. Other points to ponder included a steep decline in commodity prices and the dollar's surge in value over the Japanese yen.
Weekly Initial Unemployment Claims came in at 323,000, a five-year low. Continuing Unemployment Claims were barely above 3 million. The final source of good feelings came Friday, when the Treasury reported its monthly budget statement. In April, the U.S. registered the largest budget surplus in five years: $113 billion. Of course, income tax payments usually make April a surplus month. But, hey, through the first seven months of the government's 2013 fiscal year, the deficit is down to $488 billion, 32% lower than the same period last year.
The week ended with the Dow up 1.0%, to 15118; the S&P 500 up 1.2%, to 1634; and the Nasdaq up 1.7%, to 3437.
With stocks soaring and the week bereft of worrisome news or disappointing data, bond prices suffered. The FNMA 3.5% bond we watch ended the week down .86, at $105.18. After five weeks of declines, national average mortgage rates rose in Freddie Mac's weekly Primary Mortgage Market Survey, but remain near historical lows. The Mortgage Bankers Association (MBA) reported purchase loan applications were up 2% for the week and UP 12% compared to a year ago.
DID YOU KNOW?... The NAR reports: "Most Americans believe a housing recovery is truly occurring throughout the country. The share of Americans who think it is a good time to sell has doubled during the last year." >> This Week's Forecast RETAIL DOWN, MANUFACTURING UP, INFLATION SIMMERS, BUILDERS COOL... This week is packed with economic data, starting with Monday's Retail Sales for April, expected down for another month. Nonetheless, factories are humming, according to both NY Empire Manufacturing and Philadelphia Fed forecasts.
Staying on simmer, inflation did not heat up in April, with wholesale PPI and consumer CPI numbers predicted slightly down overall and up only a tick in Core readings that exclude food and energy. Although the housing market is recovering, builder enthusiasm cooled off in April, with Housing Starts expected to dip below the 1 million annual rate. >> 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 May 13 – May 17 Date | Time (ET) | Release | For | Consensus | Prior | Impact | | M
May 13 | 08:30 | Retail Sales | Apr | –0.3% | –0.4% | HIGH | M
May 13 | 10:00 | Business Inventories | Mar | 0.3% | 0.1% | Moderate | | W
May 15 | 08:30 | Producer Price Index (PPI) | Apr | –0.5% | –0.6% | Moderate | W
May 15 | 08:30 | Core PPI | Apr | 0.1% | 0.2% | Moderate | | W
May 15 | 08:30 | NY Empire Manufacturing Index | May | 3.5 | 3.1 | Moderate | W
May 15 | 09:15 | Industrial Production | Apr | –0.2% | 0.4% | Moderate | | W
May 15 | 09:15 | Capacity Utilization | Apr | 78.3% | 78.5% | Moderate | W
May 15 | 10:30 | Crude Inventories | 5/11 | NA | 0.230M | Moderate | | Th
May 16 | 08:30 | Initial Unemployment Claims | 5/11 | 330K | 323K | Moderate | Th
May 16 | 08:30 | Continuing Unemployment Claims | 5/4 | 3.005M | 3.005M | Moderate | | Th
May 16 | 08:30 | Consumer Price Index (CPI) | Apr | –0.2% | –0.2% | HIGH | Th
May 16 | 08:30 | Core CPI | Apr | 0.2% | 0.1% | HIGH | | Th
May 16 | 08:30 | Housing Starts | Apr | 970K | 1.036M | Moderate | Th
May 16 | 08:30 | Prescott Building Permits | Apr | 950K | 902K | Moderate | Th
May 16 | 10:00 | Philadelphia Fed Index | May | 2.5 | 1.3 | HIGH | F
May 17 | 09:55 | Univ. of Michigan Consumer Sentiment | May | 78.5 | 76.4 | Moderate | F
May 17 | 10:00 | Leading Economic Indicators (LEI) | Apr | 0.3% | –0.1% | Moderate |
>> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months... Economists expect the Fed to keep the Funds Rate at the present exceptionally low level at least through Q3 of this year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: | Consensus | Jun 19 | 0%–0.25% | Jul 31 | 0%–0.25% | Sep 18 | 0%–0.25% |
Probability of change from current policy:
After FOMC meeting on: | Consensus | Jun 19 | <1% | Jul 31 | <1% | Sep 18 | <1% |
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