Market Snapshot | January 8, 2018 | Darel Ansley | People's Bank
January 8, 2018 | Darel Ansley
For the week of January 8, 2018 — Vol. 16, Issue 2
>> Market Update
QUOTATION OF THE WEEK..."Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy." --Groucho Marx, American comedian, writer, stage, film, radio and television star
INFO THAT HITS US WHERE WE LIVE... CoreLogic reports November home prices were up 7.0% over a year ago, but forecasts a slowing of that pace, seeing only a 4.2% hike in prices by November 2018. Thanks to price gains, a major real estate listing site put the total value of the U.S. housing market at a record $31.8 trillion in 2017, up from $29.6 trillion in 2016. The site also says renters spent a record $485.6 billion in 2017, $4.9 billion more than in 2016. And this was with the rental population decreasing for the first time since 2004, according to an apartment listing service.
Need evidence of how a hike in the short-term Fed Funds Rate doesn't automatically boost long-term mortgage rates? Freddie Mac's Deputy Chief Economist reports, "Despite increases in short-term interest rates, long-term rates remain subdued.  The 30-year mortgage rate is down a quarter of a percentage point from where it was a year ago.... With the FOMC minutes showing continued support for gradual increases in policy rates...and inflation rates remaining low,  there isn't much upward pressure on long-term rates ." But he did caution, that could change.
BUSINESS TIP OF THE WEEK...  Connecting with prospects and clients at a personal level is an important aspect of any business process.  Look for shared likes, interests and experiences.
>> Review of Last Week

DOW CRACKS 25000,  FIRST TIME EVER ... The blue-chip Dow broke through 25000 for the first time in history, capping a spectacular week on Wall Street. The broadly-based S&P 500 closed at new records the first four trading days of the new year, for the first time since 1964. The tech-y Nasdaq also set four straight closing records. The December jobs report came in with 148,000 new Nonfarm Payrolls, less than expected. Investors liked that it's a good number, yet shows the economy isn't overheated, which should keep the Fed from raising rates too fast.
November's number was revised up to 252,000 new jobs, and the three-month average remains above 200,000. Plus, the unemployment rate, at 4.1%, stays at a 17-year low, testimony to the ongoing health of the labor market, important to  the housing market. Also important, last month's 30,000 new construction jobs meant  2017 ended  with 35% more construction jobs added than the year before. This should start to relieve the supply challenges seen in many markets.  Finally, the ISM manufacturing index averaged the highest reading for a calendar year since 2004!               
The week ended with the Dow UP 2.3%, to 25296; the S&P 500 UP 2.6%, to 2743; and the Nasdaq UP 3.4%, to 7137.

There was enough positive economic data to keep bond prices in check. The 30YR FNMA 4.0% bond we watch finished the week down .06, at $104.53. F reddie Mac's Primary Mortgage Market Survey f or the week ending January 4 showed n ational average 30-year fixed mortgage rates dropping to kick off the year.  Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?...  According to Realtor Magazine, the average down payment in 2016 was 11%, and for borrowers under 35, just 8%.
>> This Week's Forecast
CONSUMER PRICES EDGE UP,  RETAIL SALES GAIN NICELY ... Inflation data is all the rage these days, because the Fed says it will be slow to hike rates until there's a stronger pickup in prices. This week's Consumer Price Index (CPI) is forecast to edge up, but probably not as much as the central bank would like. However, Retail Sales are expected to go up nicely in December, after a very strong November performance.
>> 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 8 - Jan 12
Date Time (ET) Release For Consensus Prior Impact
W
Jan 10
10:30 Crude Inventories 01/06
NA -7.4M Moderate
Th
Jan 11
08:30
Initial Unemployment Claims
01/06
248K 250K Moderate
Th
Jan 11
08:30
Continuing Unemployment Claims
12/30
NA 1.914M Moderate
Th
Jan 11
08:30
Producer Price Index (PPI) Dec
0.2% 0.4% Moderate
Th
Jan 11
08:30
Core PPI Dec
0.2% 0.3% Moderate
F
Jan 12
14:00
Treasury Budget Dec
-$47.5B -$27.3B Moderate
F
Jan 12
08:30 Consumer Price Index (CPI) Dec
0.2% 0.4% HIGH
F
Jan 12
08:30
Core CPI Dec
0.2% 0.1% HIGH
F
Jan 12
08:30
Retail Sales Dec
0.4% 0.8% HIGH
F
Jan 12
08:30
Retail Sales ex-auto Dec
0.4% 1.0% HIGH
F
Jan 12
10:00
Business Inventories Nov 0.3% -0.1% Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months... The probability of another quarter percent raise in March has increased, but there is little likelihood of any further upward movement 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
       63%
May 2        40%
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