Wishful thinking – but we have been calling for a Summer rally and have pointed out how Bonds rallied each of the past two years in the month of August. That theory received a tailwind on Wednesday, as the Fed talked down the economic recovery and confirmed that the Fed’s Bond buying program will continue for a while longer. Great news for Mortgage Rates as the Bond moved above it’s 25-Day Moving Average.
However, volatility was back on Thursday as a stronger than expected ISM Manufacturing Report and better than expected Initial Jobless Claims tanked Bonds. Then Bonds reversed higher again on Friday with the news of a weaker than expected Jobs Report. Mortgage Rates, which move in the opposite direction of Bond Prices, went along for the ride as well. Looking at the technical picture, Bond Prices and Mortgage Rates have improved significantly, as the move above the 25-Day Moving Average and a “Bullish Hammer” pattern which appeared in the chart on Thursday, may indicate the beginning of a Summer rally for Bond Prices and Lower Rates for Mortgage’s. We recommend floating, not locking Mortgage Rates at this time.
The Dow closed at 15,658.36 up 30.34 points, the S&P 500 was up 2.80 points to 1,709.67 while the Nasdaq was up 13.84 points to 3,689.59. Oil was last seen at $106.73/barrel down $1.16.
Freddie Mac reported Thursday that the 30-yr fixed rate conventional mortgage is at 4.39% when paying 0.7 in points and fees.
Steady Fed: Printing Presses to Keep on Rolling
Interest rates will hold near zero and the Federal Reserve will continue buying $85 billion in bonds every month while the economy continues to improve at a “modest” pace, the central bank said Wednesday.
Amid a backdrop of gradually improving economic data and concerns of asset price inflation, the Fed provided no further clues after its policy meeting this week that it will be easing back the throttle on easy money.
No changes are imminent to interest rates, but the $85 billion monthly money-printing program known as quantitative easing will be trimmed back only if the data points, particularly on unemployment, continue to improve.
“There is nothing in the latest FOMC statement released today to suggest that Fed officials have changed their minds about starting to taper the monthly asset purchases in September,” said Paul Ashworth, chief U.S. economist at Capital Economics. Read more
Housing News
Home Prices Rise Most Since 2006, Pace Cools – S&P Case/Shiller
U.S. single-family home prices rose in May, though the pace of gains cooled compared to the month before, a closely watched survey showed on Tuesday.
The S&P/Case Shiller composite index of 20 metropolitan areas gained 1 percent on a seasonally adjusted basis, shy of economists’ forecast for a 1.5 percent increase. That marked a slower pace from April’s 1.7 percent rise. Read more
Pending Home Sales Declined by 0.4% vs the -1.7% expected in June, down from the 6.7% registered in May as higher home loan rates put a crimp on sales. Pending Home Sales is a contract that has been signed, but that has not closed.
14,000 Home Sales Daily
That is the average number of homes that sell each and every day in this country according to the National Association of Realtors’ (NAR) latest Existing Home Sales Report. NAR reported that sales had increased 15.2% over the year before. According to the report, annualized sales now stand at 5.08 million. Divide that number by 365 (days in a year) and we can see that, on average, almost 14,000 homes sell every day.
Economic News
The Associated Press reports that four out of five U.S. adults experience poverty at some point during their lifetime.
Consumer Confidence for July declines to 80.3 from the 81.4 registered in in June and below the 81.6 expected.
U.S. Gross Domestic Product rose 1.7 percent in the second quarter. Economists in a Reuters survey forecast a 0.9 percent rise in GDP in the second quarter, compared to the previous quarter’s 1.8 percent gain.
The U.S. Economy Created 200,000 Jobs in July. Economists surveyed by Reuters had expected the report from ADP and Moody’s Analytics to show the private sector created 180,000 jobs in the month.
Weekly claims for state unemployment benefits fell to 326,000. Economists in a Reuters survey forecast that jobless claims would rise to 345,000 in the latest week, up 2,000 from the week prior.
The Institute for Supply Management reading for July rose to 55.4 from 50.9 the month before. Economists polled by Reuters were expecting the ISM reading to rise to 51.9. A separate report showed construction spending in June fell 0.6 percent. Construction spending had been forecast to rise 0.4 percent after a 0.5-percent increase the month before.
The Jobs Report showed that employers added 162K new jobs in July, below the expected range of 175K – 224K.